Wall Street’s stock market gurus have been hacking away at their year-end targets for the S&P 500.
Amid the past two months’ market tumble, strategists from UBS, Goldman Sachs, RBC Capital, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank and elsewhere have adjusted their outlooks for a less rosy future.
But overall, they’re still looking pretty bullish as many continue to forecast double-digit gains over the next year.
However, these strategists covering the markets are not as bullish as the analysts covering individual stocks.
Wall Street’s research departments include both equity strategists and equity analysts. Strategists publish targets for stock markets as a whole from their big-picture analysis (i.e., top-down analysis). Analysts publish price targets on individual stocks based on their analyses of the companies they cover (i.e. bottom up analysis).
After reviewing 11,295 ratings, FactSet’s John Butters found that the the aggregate of analysts’ expectations (you can derive analysts’ implied target for the S&P 500 by combining their price targets for the respective companies they cover) imply that the S&P 500 will rocket 20% to 2,317.
The strategists, on the other hand, see the S&P climbing a more modest 13% to 2,180.
“Who will be correct?” Butters asks.
“On average from October 2013 through September 2014, both the industry analysts and the market strategists underestimated the forward 12-month value of the S&P 500,” he observed. “However, using the target price estimates from exactly one year ago (September 30, 2014), both the industry analysts and market strategists overestimated the actual value of the index on September 30, 2015.”
So, to answer Butters’ question, we’ll just have to wait and see.