As 2013 inches toward its close, Wall Street’s strategists are rolling out their 2014 forecasts for the stock market.
Today, UBS’s Julian Emanuel predicts that the S&P 500 books another double-digit gain in the coming year.
From his note:
2014 looks to be another positive year for US equities. Our year end 2014 S&P 500 Price Target of 1,950 represents a gain of 10.1% from the current price of 1,771. On forecast 2014 earnings of $US116 — 6.9% growth from 2013’s forecast $US108.5 — 1,950 represents a 16.8x trailing multiple. Supported by strong corporate balance sheets, a Fed mindful of keeping conditions on course for 3% GDP growth and the first signs of a pickup in earnings growth – multiple expansion, consistent with historical precedent, is achievable.
Since the financial crisis, S&P 500 companies have slashed their debt and ramped up their cash balances, making them less vulnerable to tighter credit conditions.
Emanuel sees politics acting as a wildcard.
Arriving at the yearend 2014 destination of 1,950 will be a more volatile journey than the relatively smooth ride of the past year. The January 15th US Government funding deadline, February 7th Debt Ceiling deadline and the Fed transition/QE tapering dialogue are sources of near term risk. Looking further into 2014 – assuming a “Kick of the Can” redux in Washington – an acceleration of investor inflows into equities and potential for positive developments from the Middle East, China, or perhaps even Washington DC as the 2014 Congressional election approaches, could cause an overshoot to 2,050.
Here are some other strategists’ forecasts 2014 S&P 500 forecasts:
- Morgan Stanley: 1,840 (12 months from September)
- Deutsche Bank: 1,850
- Citi: 1,900
- Credit Suisse: 1,900
- Goldman Sachs: 1,900
- RBC: 1,950
According to Bloomberg, the median 2014 forecast is 1,900.
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