There are less than two months left in 2014, which means one thing for Wall Street strategists: it’s time for their 2015 forecasts.
First up is UBS strategist Julian Emanuel.
The targets: 2,225 on the S&P 500 with earnings per share of $US126.
In other words, Emanuel is looking for another 14% rise in the S&P 500 index with earnings expected to climb another 7%.
“Roll tide, roll,” he says.
From Emanuel’s note:
“The S&P 500 has risen 200% since the bull market began in March 2009 — not unprecedented by historical standards. Buoyed by strong corporate balance sheets positioned to drive further M&A, the prospect of solid GDP anchoring steady earnings growth, and a Fed set to raise interest rates while mindful of incoming data, we expect the advancing tide to continue rolling. We forecast a 2015 year-end S&P 500 price of 2,225 on the back of earnings growth and modest multiple expansion, typical in a maturing rally.”
Emanuel’s forecast has a risk range of 1,750 on the downside to 2,400 on the upside.
Concerns over the health of the Chinese and European economies predominate the downside risks, while household debt decreases and net worth increases provide what Emanuel calls “dry powder” for individual investors on the upside.
Regarding the volatility seen in October, Emanuel writes that rising risk is, “perfectly normal at this point in the market cycle where the rally is maturing” and says volatility spikes in 2015 should provide added opportunities for alpha generation.
As for what is likely to drive equity gains, Emanuel cites strong payroll growth and steadily rising consumer confidence as two key drivers of the rise expected during 2015.
Overall, Emanuel writes that barring an unforeseen shock or a recession, “traditionally one of the two primary threats to a bull market is not on the horizon.”
And so while plenty of time remains in 2014, Wall Street has begun to look ahead, and at least one analyst thinks things are also looking up for next year.