What’s Up (or Down) With the S&P 500?

Confusing, conflicting outlooks keep investors guessing

Traders at the New York Stock Exchange. (Photo: AP) Traders at the New York Stock Exchange. (Photo: AP)

Investors are used to receiving complicated and often conflicting information about markets and the economy, but recent commentary about the S&P 500 seems to have gone one better. Everyone from Gary Shilling to Jeffrey Gundlach to Mohamed El-Erian seems to have a take. In a nutshell, analysts say the broad market indicator will rise in 2012, but strategists say it will not. To further confuse, Bloomberg reported Monday that the S&P 500 was poised to halt a four-month rise because of economic concerns.

“Analysts predict U.S. shares will rise enough this year to boost the Standard & Poor’s 500 Index to a record, even as Wall Street strategists say the best is already over for American equities,” the news service reported. “Individual price forecasts for stocks show the combined projection for the benchmark gauge has climbed to 1,569.74, according to more than 10,000 analyst estimates. That compares with the October 2007 high of 1,565.15.”

At the same time, Bloomberg notes that strategists who base their predictions on assessments of the economy say this year’s 12% rally represents all the gains investors will see.

Bullish analysts are basing their expectations on the belief that S&P 500 earnings will reach records every year through 2014 as stimulus by the Federal Reserve props up the U.S. economy.

“More than 70% of companies have exceeded estimates with first-quarter results," Bloomberg concludes. "Bears say Europe’s debt crisis won’t be contained and economic growth will be insufficient to maintain gains that have restored more than $3 trillion to U.S. equities in six months.” 

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