Aug 6, 2021 - Economy

Wall Street pros are upping their forecasts

Illustration of a crystal ball showing a stock chart

Illustration: Sarah Grillo/Axios

Within the span of a week, three of Wall Street’s most prominent forecasters have told clients the stock market is heading higher than they previously thought.

Why it matters: A lot of people look to these folks for guidance. Not just clients, but also the investors who read the media coverage of this research.

  • Since the beginning of the year when these strategists initially published their year-end targets for the S&P 500, the index has gone from 3,756 to 4,429 as of Thursday, a gain of 18%.
  • Their calls come at a time when markets are trading near all-time highs, leaving investors wondering if this is a peak or if things will keep going up from here.

By the numbers: On Thursday, Goldman Sachs’ David Kostin raised his year-end S&P 500 target to 4,700 from 4,300. He raised his earnings per share estimate to $207 from $193, acknowledging that companies have been more profitable than he had anticipated.

  • Oppenheimer’s John Stoltzfus raised his target to 4,700 from 4,300 three days earlier. He raised his EPS estimate to $196 from $175, noting that revenue and earnings have held up impressively despite the spread of COVID-19 variants and ongoing supply chain issues.
  • Deutsche Bank’s Binky Chadha offered a less rosy assessment when raising his target to 4,500 from 4,100 last Friday.
  • "We continue to look for a notable correction as macro growth peaks," Chadha warned. Though he raised his EPS estimate to $210 from $202, making him the most bullish of the group from a profitability perspective.

What they’re saying: "As long as I have been in the business, the end of 2Q EPS season has been the time of the year the sell-side initiates EPS and targets for next year and tweaks their second-half numbers as well," Real Money columnist Helene Meisler tells Axios.

  • "So mostly I think, ‘Sure, it sounds like they are getting bullish near the highs,'" she says. "But I think it's actually quite a seasonal thing they do."

The bottom line: Not even the most sophisticated, well-resourced, full-time equity strategists can predict with precision where the stock market is heading over the next year.

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