What You Need to Know
- With the S&P 500 Index staging an improbable 16% advance this year, being both bearish and wrong is making life awkward for the people paid to predict where equities will go next.
- “Bears make you smart — but bulls make you money,” said BMO Capital Markets’ Brian Belski, who just raised his end-year S&P 500 target.
- Narrow leadership, recession risk and downward earnings revisions are some of the key concerns leveled by skeptics.
As the trillion-dollar AI rally gathers pace, pity the humans on Wall Street trying to figure out this gravity-defying market.
With the S&P 500 Index staging an improbable 16% advance this year, being both bearish and wrong is making life awkward for the people paid to predict where equities will go next.
After being blindsided by the resilience of the U.S. economy thus far, humility is the order of the day for the sell-side pros who remain at loggerheads on what’s ahead.
Goldman Sachs Group Inc.’s David Kostin expects stocks will gain further, while Morgan Stanley’s Mike Wilson and JPMorgan Chase & Co.’s Marko Kolanovic have warned investors to stay away.
At Bank of America Corp., there’s a disagreement under the same roof, with Savita Subramanian emerging as one of the most optimistic market voices as colleague Michael Hartnett says a renewed downswing is coming.
One thing’s for sure: The S&P 500 has already blown through its average year-end price target. Strategists are currently expecting the benchmark to end 2023 just below 4,100, with Friday’s 4,450.38 close leaving it 8.5% above that figure.
The last time the gauge traded above the consensus target like this was in the pandemic mania of September 2020, according to data compiled by Bloomberg.
No wonder some equity analysts are sounding a little defensive, hoping their prognostications will be vindicated soon enough as hawkish Federal Reserve policy bites.
Others are issuing words of humility to clients, expressing their temptation to nudge targets higher as the tech megacaps names surge higher.
Those who are getting things largely right are letting off steam, calling out naysayers for being too clever for their own good.
“Bears make you smart — but bulls make you money,” said BMO Capital Markets’ Brian Belski, who recently raised his end-year target to 4,550 from 4,300.
Narrow leadership, recession risk and downward earnings revisions are some of the key concerns leveled by skeptics.
Plus, in the second half of the year something big could break in markets, or in the consumption and investment cycle – vindicating those currently cautious on risk assets. Yet, at least for now, the market continues to power higher and data suggests the economy can avoid a recession.
“I am certainly one of the investors who did not see it coming and did not expect it, even when it started, to last or go this far,” said Liz Young, SoFi’s head of investment strategy. “People that were cautious are kind of looking at the market and saying, am I missing something?”
At Citigroup Inc., Scott Chronert points to “a lack of concrete earnings revision support” in deciding not to jack up his target.