A couple years ago I noticed a strange phenomenon that occurs around the end of each year – and the beginning of each new year.
Dozens of necktie-clad stock market experts appear on CNBC (and in other media) and proclaim they “expect the market to rise 8-10%” the following year.
Since this annual ritual seemed to encompass the boiler-plate narrative amongst the highly-paid Wall Street analysts and money managers, I decided to start keeping track.
With the market essentially flat in 2015, they sort of blew it – but many managed to salvage their reputations this past year in 2016.
Here are the (original) 2016 year-end targets that were released a year prior. I shaded in green everyone that came within 50 points (a couple percent).
2016 turned out well for “consensus expectations”. It’s also worthwhile noting the 2015 predictions and how they panned out. The majority were a bit overly optimistic. This year
they got lucky their hard work paid off.
Bloomberg summed up 2016 well with this headline.
Well done Wall Street strategists…
As we enter 2017 I decided to go ahead and keep things going. Here are the 2017 year-end price targets of the major Wall Street firms.
The table above was updated several days into the New Year when Mr. Tom Lee finally released his (shocking) year-end price target. As you probably know, I originally “took the under” and I respect Mr. Lee’s attempt to do the same. However you see I adjusted my target a bit too.
A lot of hard work goes into these year-end projections and there are always more details provided. Generally speaking, the analysts come up with a SPX earnings number and then assign a p/e multiple to it to arrive at their forecast.
One thing that strikes me this time around is that the “Financials” seem to be the #1 favorite sector going into 2017.
It’s not hard to understand why because as the famous saying goes…
“Banks and financials tend to do well in a rising rate environment” (drink)
As we see below in the annual Barron’s year-ahead “predictions for the new year” article, 8 out of 10 analysts agree that financials are the place to be in 2017.
One interesting thing about the year-end price targets for this year is that not one firm expects the market to end down for the year (tank).
I guess we’ll just have to see.
Remember, in 2016 things kicked off on a bit of a sour note – with the market literally having it’s worst start to a year ever. Several firms actually lowered their 2016 price targets down near the Feb lows.
Since many of these firms reserve the right to adjust the year-end targets throughout the year as the price moves, my methodology is to track the original price targets to keep things simple.
Intra-year revisions tend to make things confusing as we see below.
This revision occurred in February, right at the dead-low for the year.
They should have just stuck with 2200 which turned out to be “within 50 points” of the year-end close.
By the way, on the 2017 price-target table above, you’ll notice that just for fun, I added my own 2017 year-end target and decided to take the “under” and go just below everyone else. The way I look at it “whoever comes closest at the end of the year wins” and I’m comfortable with my “price is right” strategy.
We’ve all seen the articles about how year-end price targets are nonsense and how over the years most strategists tend to have poor track records at predicting where the SPX will close the following year.
But I’d like to congratulate those that came close this past year because they deserve it.
Here’s to a great New Year and the analyst’s hopes that the market will rise 8-10% again in 2017.