Market Forecasts of 2016 and 2017 By: Gabriel PotterMBA, AIFA® 2017.01.05
 Market Targets from January 2016

Flat-to-negative returns of the 2015 year chastened some analysts into lowering their predictions for 2016.  After some off and on results in the first half of the year, 2016 ended with a bang as several key equity indices hit all time highs. 

As a reminder, here were the Wall Street 2016 S&P 500 targets which we presented a year ago.

Analyst

Institution

S&P Forecast for 2016

Andrew Garthwaite

Credit Suisse

2150

Stephen Auth

Federated Investors

2500

Jonathan Glionna

Barclays

2200

David Kostin

Goldman Sachs

2100

Dubravko Lakos-Bujas

JP Morgan

2200

Tobias Levkovich

Citi

2200

Adam Parker

Morgan Stanley

2175

Savita Subramanian

Bank of A. Merrill Lynch

2200

John Stoltzfus

Oppenheimer

2300

David Bianco

Deutsche Bank

2250

Jeffrey Knight

Columbia Threadneedle

2200

Russ Koesterich

Blackrock

2175

John Praveen

Prudential

2250

Brian Belski

BMO Capital

2100

Sam Stovall

S&P Capital IQ

2250


Source:  Dow Jones Market Watch, Barron’s

The S&P 500 was at 2043 on Jan 1st, 2016 and it was supposed to hit a predicted average of 2216.  The actual closing value of the S&P 500 on December 31, 2016 was actually 2239 – a pretty close call to the originally forecasted range.  Once you factor in dividend payments, the total return of the S&P 500 was 11.96% in 2016. 

Revisiting 2016:  a clean finish

What was the reason for the year-end rally?  Was it a Trump-bump after the contentious election?  Unbridled optimism about potential tax cuts?  Was it bullish animal spirits taking over investors?

No - the market rally was fueled by old-fashioned earnings results.  3Q earnings results reflected all time highs for the S&P 500.  Although the fourth quarter looks a bit slower, the 3.5% increase in 3Q 2016 in GDP is still the best result we’ve had in two years, with solid fundamentals.  For all the sturm and drang in the news, corporate America continued to act wisely, perhaps over-cautiously throughout the year – building cash, buying back stock, and not overextending itself with unprofitable mergers or extensive property, plant and equipment (PP&E) investment. 

The Updated Market Targets for 2017

Again, we start on January 1st 2017 with the S&P at 2239.

Here are the new 2017 S&P 500 targets.  The average of the 2017 forecast is about 2370 – about 6% higher than where it is now, by price.  Once you factor in dividend payments as well, you can fairly say that the Wall Street consensus is still optimistic for 2017.

Analyst

Institution

S&P Forecast for 2017

Andrew Garthwaite

Credit Suisse

2300

Stephen Auth

Federated Investors

2350

Jonathan Glionna

Barclays

2400

David Kostin

Goldman Sachs

2300

Dubravko Lakos-Bujas

JP Morgan

2400

Tobias Levkovich

Citi

2325

Adam Parker

Morgan Stanley

2300

Savita Subramanian

Bank of A. Merrill Lynch

2300

John Stoltzfus

Oppenheimer

2450

David Bianco

Deutsche Bank

2350

Jeffrey Knight

Columbia Threadneedle

2450

Heidi Richardson

Blackrock

2400

John Praveen

Prudential

2575

Brian Belski

BMO Capital

2350

Sam Stovall

S&P Capital IQ

2335

Source:  Dow Jones Market Watch, Barron’s

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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