Commentary: Paul Ebeling on Wall Street
Wall Street analysts are predicting another up year for the S&P 500 Index (SPY)
It is worth taking notice what would be accomplished if that prediction happens.
At 2,800, the average estimate of 9 strategists tracked points not only to another year of all-time highs, but also an extension of a Bull Market that would make it the longest recorded ever.
From the depths of the financial crisis, the rally that started on 9 March 2009 is now just months away from surpassing the Y’s 1990-2000 Bull run.
Wall Street’s penchant for Bullishness always looks prescient when prices are rising, are sticking with what works; a 285% rise in the S&P 500.
Earnings are expanding at a double-digit pace, the economy is strengthening across the globe with a consistency not seen in at least 10 years, and tax cuts in the US will add even more stimulus.
This is the sensible position.
Historically equity markets have risen in line with growth of the economy. So, the logical forecast is for what just happened to continue and calling a Key reversal is difficult in the extreme.
The data since Y 1999 show Wall Street forecasters have never predicted a down year, putting the average annual gainer at 9%.
Notably, nothing now on the cards show a market rout ahead.
Over the past 2-weeks we saw stocks just rebounded from 2-week pullback, aka a pause to refresh, moving again to all-time highs, as the focus came back seasonal patterns during the Holiday Season.
Be aware, that market meltdowns usually give advance warning.
In January 2008, the start of 1 of the worst years in US stock market history, market strategists’ projected an increase of 11% for Y 2008, the most Bullish in 5 years citing everything from low valuations to prospects for an expanding economy and interest rate cuts.
Where the Bullish sentiment is too high, too long the Red lights flash Proceed at your own risk.
Then more than $7-T of equity value was erased as the S&P 500 deep dove 39%. But, trillions were made on the Southside move by the professionals, and the climb to records began again.
Fast-forward to now and a 16.2% gainer has put the S&P 500 on track for its best annual rise since Y 2013, besting even the highest forecast made last January.
YTD returns on the major US indexes are as follow:
- NAS Comp +28.0%
- DJIA +19.1%
- S&P 500 +16.2%
- S&P Mid Cap 400 +12.0%
- Russell 2000 +11.9%
US stocks have rallied 4 years longer than they did in the mid 2000’s, the S&P 500 is 66% higher than its Top in Y 2007, and P/E ratios have expanded by more than 4 pts.
All of the strategists whose conservative estimates at this time last year have required them to play catch-up throughout Y 2017, are all Bulls now.
None of the 9 who have published their projections expects the S&P 500 to fall from current levels. Higher earnings will push higher and higher despite elevated valuations and 2950/3000 is the most optimistic in print.
Tax reform is a Key reason to stay invested in stocks.
After predicting the S&P 500 would end Y 2018 at 2,500, I am boosting my target to 2,900. A reduction in the corporate tax rate is likely to pass in here, thus.helping earnings expand 14% to $150/share.
Keith Parker of UBS Group AG, whose target stood at 2,900, said the S&P 500 can surge to 3,300 should tax cuts take effect next year.
The S&P 500 has exceeded strategists’ target by 3.8% a year during this Bull market. At the same time, during Y’s 2000-2002, listening to their bullish calls would have resulted in half your investment being lost.
Goldman’s Kostin expects the advance to last 3 more years.
As I have learned over the past 40 years in this profession, worries about the Southside risk is a Key reason stocks will keep driving North.
Doubt, fear and rushes to judgement have been trying to diagnose the end of Bull Market since they began begetting this Wall Street adage, “Stock markets always climb a Wall of Worry.”
It is time to accept fundamentals and tune out the Noise.
The Bulls Vs The Bears
VIX: 11.43; -0.33
VXN: 13.79; -0.52
VXO: 9.75; +0.27
Put/Call Ratio (PCR) CBOE: 0.80; -0.15
The Bulls Vs The Bears
The Bulls dipped but are still over 60.0 for 6 weeks running.
The Bears rose, indicating the Bears are concerned.
The Bulls are at 63.5 Vs 64.4 last
The Bears are at 15.4 Vs 14.4 last
Support and Resistance
Dow +31.81 at 23557.99, Nasdaq +21.80 at , S&P +5.34 at
DJIA close: 23,557,99
23,358 a Nov 2017 high
The 20 Day EMA: 23,343
The 50 Day EMA: 23,968
22,420 the Sept 2017 high
22,179 the Aug 2017 high
22,086 an Aug 2017 high
21,681 the Jul 2017 high
21,638 a Jul 2017 high
The 200-Day SMA: 21,603
S&P 500 close: 2602.42
2578.85 a Nov 2017 high
The 20-Day EMA: 2575
The 50-Day EMA: 2548
2535 the upper channel line from the 9 Mar 2009 uptrend channel
2491 the Aug 2017 high
2480 a Aug 2017 high
2453 the Jun 2017 high
The 200-Day SMA: 2441
NAS Comp close: 6889.15
6783 a Nov 2017 high
The 20-Day EMA: 6715
The 50-Day EMA: 6609
6477 the Sept 2017 high
6463 the Y 2016 trendline
6461 the Jul 2017 high
6450 a Sept 2017 high
6342 the Jun 2017 high
6300 a Jun 2017 high
The 200-Day SMA: 6220
Have a terrific week
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