Traditionally, even stocks that have soared to record new heights can be forecast to go even higher by the professionals on Wall Street. That trend might not fit reality now however.
The S&P 500 was forced down to 2,147.61 on Tuesday, representing over a 1 percent slump in response to U.S. shares dipping to a new monthly low.
Fifteen national brokerages were surveyed on their forecasts regarding a year-end target for the S&P 500, with the average being 2,146 at the start of this month. With yesterday’s 0.5 percent drop, that’s 10 points below the closing mark on Tuesday. It’s the first time in two years that the index has finished above analyst forecasts.
“If you view the market as a fundamentalist, then the reaction we’ve seen in the last couple of days actually makes sense,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“There is no factor that we can see driving the market in an upward direction even though sentiment has swung to be positive in general. There is some divergence among prominent analysts in the financial sector with firms like Goldman Sachs staying relatively bearish on equities and sitting on their cash.”
Market analysts on Wall Street are usually a dependable source of enthusiasm and their annual predictions never fall below market prices for prolonged periods. The members of the survey set the index over two years ago at 2,141 and it has fluctuated around that mark steadily.
However, that solid bullish sentiment has declined this year with the bump in equities, and some analysts have reduced their projections which resulted in a fall of the surveyed average.
A champion of the bearish stance most recently has been Goldman Sachs Group Inc. who set a low target for both the S&P 500 and Europe’s Stoxx 600 gauge, saying they would both dip about 15 percent in the next quarter.
In a report by the firm’s equity strategists they said, “We are staying pretty neutral as we look towards next quarter and remain underweight on stocks and overweight on cash. As we see it, due to equities staying on the expensive side and growth in earnings levelling out, equities could well be at their ceiling for their recent rally.
David Kostin, the company’s U.S. equity chief strategist said the main stock indices may fall sharply as we get close to the holiday season.
