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Why stock market strategists have never been confused about the stock market’s year-end prospects in June



In the past two quarters, this has been the best time and the worst time for benchmarking US stocks, which is perhaps why Wall Street analysts are facing their biggest confusion challenge to date.

Dow Jones Industrial Average
Taoism
+ 0.84%

S&P 500
SPX,
+ 1.54%

Dow Jones market data shows that it only hit its best quarterly performance since 1938 after a pandemic broke out in March. If it weren’t for some simple facts, that performance would be outstanding: the Dow Jones Index recorded the worst first six months of the year since the 2008 financial crisis, while the S&P 500 index recorded the worst first half of a decade .

In other words, the rate of return for this quarter was a disturbing quarter, which was ushered in by the outbreak of the US COVID-19 epidemic and its subsequent penalties for the economy. Fatal infection.

Since hitting a low of 2,237.40 on March 23, the S&P 500 index has soared 38% to nearly 3,100 points, while the Dow Jones index has risen 38.5%, the Nasdaq Composite Index
COMP,
+ 1.87%

It has risen about 46%.

The problem is that there is no consensus on where the market is going from now on, and strategists are more inclined to improve the year-end prospects of the S&P 500 index than to lower its target, even if the market has greatly exceeded the target. With the recurrence of coronavirus cases in parts of the United States

Jason Goepfert, the head of SentimentTrader and founder of independent investment research firm Sundial Capital Research, wrote in a report on Tuesday that based on the standard deviation, strategists have never been confused about the prospects before the end of the year (see attached photo):

At the same time, Bloomberg News quoted the latest research survey of Nicholas Colas, co-founder of DataTrek Research, and pointed out that one in five respondents said that the S&P 500 index will be 10% higher than the current level this year. , And roughly the same number predicts that it will end the year to this extent.

Goepfert estimates that based on another method of considering the strategist’s standard deviation (expressed as the share of the S&P 500 index at the end of June), analysts’ current disagreements are only the largest since 2009. Of course, this gap is still quite wide (see chart):

Day d analysts said that the average year-end target for S&P 500 analysts was 2,998 points, 3% below the current level. According to Goepfert, this target matches the lowest year-end target relative to S&P trading at the end of June.

However, this may be a good thing. If the average target price is so low, then even if the subsequent short-term market returns are not satisfactory, the market will tend to be good in the following six and twelve months.

Goepfert said that in the next six months, from July to December, the average return of the S&P 500 index exceeded 7%.

He said that it was at a time when strategists were more consistently bullish, and pointed out that during this period, the market tended to return to negative 1.7% before the end of the year.

The Wall Street Journal wrote that analysts at Bank of America set S&P’s target price of 2,900 at the end of the year, surrendering the previous expectations of 2600 and 3100. Goldman Sachs raised the low end of its three-month target from 2400 at the end of May to 2750. Reports say the index hovered around its year-end forecast of around 3,000.

Of course, considering all the variables that the market must digest, including the 2020 presidential election that could affect the stock market and the decades of recession in the economy, it is impossible to know where the market will be heading towards the dramatic end of the year. In just a few months, millions of people were unemployed.


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