This is one of my favorite posts to write every year as we get to look back on Wall Street predictions and see how they panned out. We have done this in 2014, 2015, 2016, 2017 and 2018 so it is a tradition to see which strategists did well and which missed the mark.
Last year, the strategists predicted a bull market for 2018 with an average target of +6%, 2850, for the S&P 500. Those predictions looked pretty good heading into the fourth quarter, but after a sharp decline, all of them badly missed the mark as the S&P 500 suffered through a terrible stretch and hit a year to date low of 2346 on Christmas Eve. The best of the best was Citibank's Tobias Levkovich and UBS's Ben Laidler who both predicted a slightly down year. Now let's take a look at their thoughts on 2019...
Predictions for 2019
After looking at all the Wall Street reports, here are the targets from 11 strategists.
The good news is that expectations are for the bull market to come roaring back with an average target of 3000 for the S&P 500. However, these numbers should be taken with a grain of salt because many were made before the sharp December Grinch decline with some offered up in September. I would expect many of the strategists, if not all of them, to revise their targets lower because there are a few that are way too high.
Let's take a look at the forecasts and I've also included their predictions from last year so you can see if they are bullish or even more bullish. Note that the Runnymede investment team will discuss our outlook on 2019 on our quarterly webcast in the next couple of weeks. If you are interested in attending, please email us at firstname.lastname@example.org.
Binky Chadha of Deutsche Bank has the street's highest target currently at 3250 but that is from November 19th.
“It will take a while for the market to regain its prior peak” after rollercoaster equity trading in 2018, Chadha said. Volatility shocks take a while for equities to recover from, and buybacks “which have been the only consistent source of demand for equities in the cycle will once again become the primary driver. But they argue for only a gradual trend higher,” he added.
“The list of worries for the market is long and concerns about peak earnings are unlikely to dissipate until there are clear signs growth is steadying,” Chadha wrote.
Now onto the cautious views of street... Morgan Stanley's Mike Wilson is cautious heading into the new year and is calling the current environment a rolling bear market.
“After a roller coaster ride in 2018 driven by tighter financial conditions and peaking growth, we expect another range-bound year driven by disappointing earnings and a Fed that pauses,” Wilson wrote. “Valuation should be key factor in stock selection.”
At the core of Wilson’s view is concern of an impending earnings recession next year as continued tightening financial conditions and decelerating growth weigh on corporate profits. Two years of strong earnings buoyed by topline growth, margin expansion and a boost from lower taxes in 2018 “will be hard to replicate next year,” he noted.
Morgan Stanley’s base case price target for the S&P 500 is 2,750 for 2019, with a bull and bear case of 3,000 and 2,400, respectively. The firm anticipates the S&P 500 will trade within a range of 2,650 to 2,800 by the end of 2018.
What do you think will happen in 2019? Are you a bull or a bear for the New Year?