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A Review of Stock Market Predictions for 2017— 10 Weeks Later

Stock-Markets / Stock Market 2017 Mar 12, 2017 - 05:50 PM GMT

By: Nicholas_Kitonyi


Towards the end of 2016, there was a seemingly unending stream market prediction from legitimate analysts and a host of self-styled experts about where the markets are headed in 2017. Some analysts interpreted the signs to suggest that 2017 will be rewarding for investors and there wasn’t a shortage of analysts who saw reasons to be bearish on the market in 2017.

On the one hand, the surprise victory of Donald Trump and the uncertainty that it could trigger provided market bears with reasons to be fearful. On the other than, Trump's vocal America-first stance  and the fact that stocks started soaring soon after his victory warmed Wall Street up to the idea that Trump might be good for the market after all.

Two months are already gone by in 2017 and the first quarter will end in the next two weeks. This article seeks to review the leading stock market predictions for 2017 with a view to reminding traders and investors what analysts think we can expect in the next three quarters.

Here are the some market predictions for 2017

UBS sees S&P 500 at 2,300

Analysts at UBS led by Julian Emanuel said, "despite the potential for more volatility, we expect the bull to celebrate its eighth birthday in March 2017." The analysts also noted that changes in interest rates could affect equities. They noted that "no recession is in sight, for now. However, the old saying 'three steps and a stumble' could put stocks to the test when the Fed hikes again after a hike this December."

Goldman Sachs sees S&P 500 at 2,300

Analysts at Goldman Sachs led by David Kostin believe that proposed tax changes could provide stocks with bullish tailwinds. They observed that "Hope is potential for positive EPS revisions from lower corporate taxes, repatriation of overseas cash, less regulation, and fiscal stimulus." The analyst are however worried that "fear is risk that budget deficit limits tax reform, rising inflation prompts Fed to tighten steadily, and bond yields continue to rise."

Bank of America Merrill Lynch sees S&P 500 at 2,700 or 1,600

You might want to think twice about trusting the 2017 market prediction from Bank of America Merrill Lynch. The BAML analysts led by Savita Subramanian observed that "2017 could be a binary year when the market falls to 1,600 in the bear case and rises to 2,700 in the bull case."  They also noted that "2017 may be the least certain in years, with higher-than-usual risks and a binary set of outcomes that have dramatically contrasting results: euphoria or fizzle, significantly higher or lower than the base case." 

Deutsche Bank sees S&P 500 at 2,350

Analysts at Deutsche Bank led by David Bianco believe that "the S&P 500 should be 2,250 by inauguration and 2,300 upon a sizable corporate tax rate cut."  The analysts however noted that the first 100 days after inauguration could be choppy for equities as Trump settles into the Oval Office. In David's words, "the corporate tax rate is likely cut in the first 100 days and other proposed major corporate tax code changes deferred. The time in between inauguration and tax cuts is risky; waiting for stimulus when rates and FX markets reflect such will cap stocks."

Here's how stocks have fared in the year-to-date period

The chart above shows how stocks have fared since the markets opened for trading this year. The NASDAQ Composite index is up by an impressive 8.66%, the S&P 500 is up a decent 6.10%, the Dow Jones Industrials is up 6.03%, and the small caps in the Russell 2000 index are up by 2%. From the foregoing, it is obvious that the bulls are currently having a field day in the U.S. equities market.

However, we will need more information on market events in the next 9 months before we can judge the rightness or wrongness of the predictions. Analysts at Credit Suisse observe that it is still a little too early to rejoice or conclude that 2017 is a bullish year. Credit Suisse analysts led by Andrew Garthwaite observed that "we see a down market in H2 2017, hence our year-end 2017 target of 2,300. The second half challenges include the potential negative impact of US bond yields above 3% (3% being the CS view for end-2017); the growing pricing power of US labor squeezing profit margins; and the risk of China refocusing on reform rather than pro-growth policies. We continue to prefer equities to both bonds and gold."

By Nicholas Kitonyi

Copyright © 2017 Nicholas Kitonyi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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