viernes, 3 de marzo de 2017

viernes, marzo 03, 2017

Skeptical Wall Street Strategists Undone by Market Rally

The S&P 500 has already surged above Wall Street strategists’ original year-end target

By Steven Russolillo

       Traders at the New York Stock Exchange last week. Photo: Michael Nagle/Bloomberg News


Wall Street strategists rarely get their annual stock market predictions right. For the second year in a row, it only took two months for the market to prove them wrong.

The collective brain trust that predicts where the market is headed entered the year with more skepticism than usual. Hefty valuations, slow growth and the uncertainty of Donald Trump as president justified the caution. At the time, they anticipated the S&P 500 would rise 5% and finish the year at 2356, the lowest expected gain since 2005.

Much has changed in just a few months. The S&P 500 already has blown past that target. At least two strategists have since raised their projections. Others might be forced go back on their predictions. The consensus forecast among 19 strategists is now 2385, right around where the index trades today.

Playing catchup isn’t anything new for these prognosticators. Frequently, they don’t want their projections to deviate too far from the market. But it is a lesson in caution for investors who follow them for clues on what stocks will do next.

Consider what transpired around this time a year ago: Stocks started 2016 in a deep rut, with the S&P 500 falling more than 10% through the first six weeks of the year. From the beginning of that year through Feb. 12, the day after stocks bottomed, the consensus year-end forecast had fallen to 2158 from 2200. Savita Subramanian at Bank of America Merrill Lynch at the time slashed her target by 200 points to 2000. As we know, the S&P 500 rebounded to finish last year at 2238.

Are strategists zigging when they should zag again this year? Stifel Nicolaus’s Barry Bannister recently boosted his target to 2400 from 2300. Ms. Subramanian earlier this week raised her year-end forecast to 2450 from 2300. The most bullish is Deutsche Bank’s Binky Chadha, who is looking for the S&P 500 to finish the year at 2600.

As many strategists have oscillated, FundStrat’s Thomas Lee has stayed relatively steady. At the market bottom last year, Mr. Lee was the most optimistic of the bunch, expecting the S&P 500 to close the year at 2325. That overshot where it finished, but not by much. Mr. Lee is now Wall Street’s biggest bear. With the lowest forecast of the group, he expects the S&P 500 to finish the year at 2275.

This all comes as stocks have risen on signs of growing confidence in the economy and hopes that Mr. Trump will deliver on promises to cut taxes, loosen regulations and boost infrastructure spending. Another Federal Reserve rate increase as soon as later this month doesn’t appear to have investors overly concerned. Neither does rising valuations. The S&P 500 trades at about 18 times projected earnings, the highest since 2004.

The rally is showing few signs of slowing down. The only problem is that i’s what most people expect—precisely when the opposite tends to play out.

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