“Fundamental drivers of growth can persist,” Keith Parker at UBS wrote in a note to clients earlier this month. He sees the S&P 500 ending next year at 3,200. “No further trade escalation, solid but slowing growth and moderately higher rates underpin our view.”
All but one strategist expects stocks to go up next year from where they are now. Yet underneath the buoyancy, a gap is widening. At 22 percent, the spread between the highest and lowest forecast is the widest since 2012.
Mike Wilson at Morgan Stanley is the least bullish, with a target at 2,750. The pace of profit expansions will slow to 4.3 percent, one fifth of the rate seen this year, and the odds for two consecutive quarters of negative growth are rising as global demand weakens, he said.
Meanwhile, some sense of caution is creeping up. Even the biggest bull is turning a bit defensive. Golub at Credit Suisse this week downgraded cyclical stocks such as banks, industrials and materials producers while raising recommendations for companies seen offering stable income and dividends, like health-care and consumer staples.
Similarly, Bank of America’s Savita Subramanian urged investors to buy utility stocks as a hedge against market declines. She said the S&P 500 may peak at around 3,000 before retreating to end the next year at 2,900.
“We suspect that we see a peak in equities next year, but bearish positioning and weak sentiment in stocks present upside, especially if trade risks subside, keeping us constructive for now,” Subramanian wrote in a note to clients.
This story provided by Bloomberg News.