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It’s that time of year again when Wall Street’s top equity strategists publish their 2013 targets for the S&P 500.The Reformed Broker Josh Brown likes to call it “silly season” as the success of these stock market calls seem to come down to luck.
Regardless, clients demand it and it gives the rest of us a sense of who the most bullish and bearish strategists are.
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Barclay’s Barry Knapp is the latest strategist to submit his target, calling for the S&P 500 to end 2013 at 1,525.
“We are entering the fifth year post ‘The Great Contraction’ with considerable progress made in deleveraging the financial and household sectors; however, the most complex stage – stabilizing public sector debt – remains a formidable challenge,” writes Knapp. “There are some significant competitive advantages that should begin to accrue to the U.S. economy in the years to come – energy, manufacturing competitiveness and demographics – though the savings required to fund investment could be redirected to the public sector if policymakers do not slow the growth of mandatory spending.”
Richard Bernstein, the former top strategist at Merrill Lynch, also spoke about 2013. “According to our models, the US equity market is presently discounting 5%-6% inflation for the next 12 months, which seems very extreme to us,” he wrote. “We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982’s bull market.”
As far as we can tell, 14 top strategists have made their 2013 calls, which range from 1,390 to 1615.
2013 EPS: $103
Strategist: Gina Martin Adams
Comments: 'The U.S. economy will likely continue to struggle with the ongoing impacts of debt deleveraging in 2013, suggesting policy is likely to be the dominant driver of market sentiment for the fifth year running. However, there is evidence that global deleveraging is progressing along to a new phase in its evolution. The first four years of the process were characterised by private sector debt reduction, the vast majority of which was absorbed by public coffers. Now, as the private sector unwind of debt nears completion, the onus is shifting to the public sector to address bloated debt balances in the year ahead.'
2013 EPS: $108
Strategist: David Bianco
Comments: 'Our 12-month S&P 500 target remains 1500, but modest PE expansion toward the long-term norm of 15+ would make 1600 reasonable...Keeping capital gains and dividend tax rates low and equal, both 23.8% or less, and lower foreign earnings repatriation taxes would make 1600+, or 15x our 2013 EPS of $108, a reasonable 2013 yearend target.'
Source: Deutsche Bank
2013 EPS: $105
Strategist: Barry Knapp
Comments: 'We are entering the fifth year post 'The Great Contraction' with considerable progress made in deleveraging the financial and household sectors; however, the most complex stage -- stabilizing public sector debt -- remains a formidable challenge. There are some significant competitive advantages that should begin to accrue to the U.S. economy in the years to come -- energy, manufacturing competitiveness and demographics -- though the savings required to fund investment could be redirected to the public sector if policymakers do not slow the growth of mandatory spending.'
2013 EPS: $--
Strategist: Garry Evans
Comments: 'Our economists see growth disappointing in 2013 with added risk as a result of uncertainty surrounding the fiscal cliff...Political uncertainty is also high and history tells us that the US underperforms in the first year of a presidential cycle.'
2013 EPS: $107
Strategist: David Kostin
Comments: 'S&P 500 sales, which are measured in nominal terms, will rise by 4.4% in 2013 and 4.7% in 2014. We forecast net margins will remain static as they have for the past 18 months, hovering in the 8.8%-9.0% band through the end of 2014. Given this environment, S&P 500 EPS will rise from $100 in 2012 to $107 in 2013 and $114 in 2014.'
Source: Goldman Sachs
2013 EPS: $106.25
Strategist: Brian Belski
Comments: 'Admittedly, we are forecasting relatively low rates of earnings growth for 2013 given our price forecasts,' he writes. 'Our reasoning is that the productivity well has all but run dry and current peak profit margins are set to decline, putting some downward pressure on earnings growth unless global demand picks up again.'
Source: BMO Capital
2013 EPS: $108
Strategist: John Stoltzfus
Comments: 'We continue to believe that prospects remain good for economic growth to reassert itself as challenges are persistently met by concerted efforts of country officials and central bankers around the world aided and abetted by secular trends larger than the cyclical hurdles in the immediate path. We expect the process of fostering an economic recovery from the grips of a global financial crisis will persist and ultimately prove successful. We believe that the performance of the equity market stateside, and increasingly the performance of stock markets outside the US as well, point to that end. Equity markets are historically known to be discounting mechanisms for what lies ahead.'
2013 EPS: $110
Strategist: Savita Subramanian
Comments: 'The path to our 2013 year-end S&P 500 target of 1600 is not a straight line, and we remain somewhat cautious on US equities in the near term, as the US Fiscal Cliff and the growth outlook for Europe and China remain overhangs. But we expect to be in a better place by mid 2013, as BofAML economists expect a bottoming in China growth, reduced tail risk from Europe, and a multi-stage fix to the Fiscal Cliff.'
Source: Bank Of America Merrill Lynch
2013 EPS: $108
Strategist: Tobias Levkovich
Comments: 'A plausible shift towards The Raging Bull thesis outlined last December remains intact. The Raging Bull argument highlighted growth drivers such as the energy sector's expansion, US manufacturing competitiveness, the explosive penetration of IT mobility and a housing rebound, combined with some positive demographic shifts for baby boom echo savers and more fiscally responsible behaviour out of politicians.'
2013 EPS: < 5% year-over-year growth
Strategist: Scott Wren
Comments: 'I don't think that consumers are going to step up to the plate. I think that business investment is going to be low. But I do expect Chinese growth to be better.'
2013 EPS: $--, 'This path leads to very sluggish GDP, on the border of a recession, and an accompanying weak earnings picture as well.'
Strategist: Jeff Kleintop
Comments: 'In 2013, it will likely be the change in valuation that drives most of the performance of stocks, and the sentiment shift and willingness to take on risk reflected in that movement will be meaningful for bonds as well. The direction of the markets in 2013 may be more about feelings than facts.'
Source: LPL Financial
2013 EPS: $--. 'According to our models, the US equity market is presently discounting 5%-6% inflation for the next 12 months, which seems very extreme to us.'
Strategist: Richard Bernstein
Comments: 'We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982's bull market...US corporate profits continue to be the healthiest in the world.'
Source: Richard Bernstein Advisors