With stocks on the S&P reaching new heights at the end of last week, 10% year to date, the question on everyone’s mind is how long the ride will last. According to LPL Financial’s Ryan Detrick “This is only the sixth time since 1950 that the S&P 500 has made it at least a year without so much as a 5 percent correction, and marks the longest streak since 1995”. Detrick points out there is not only room for optimism, but there is a good chance that the market will experience a second rally before year’s end.
Relying on historical precedent, Detrick notes that 84% of the time that the S&P 500 rallied above 8% in the first half of the year, it would rally again between 4-5% in the second half. Secondly, many Wall Street analysts are forecasting a 6-7% growth this quarter. However, if there is a dip Detrick believes that investors should actually buy it.
Mark Tepper, president of Strategic Wealth Partners stated on Friday, “The odds are very high that the S&P goes all the way to 3,000”. While noting that the rise would not be “a straight-lined advance” he did opine that positive economic trends would continue through 2018 and perhaps 2019.
However, not everyone agrees with these positive assessments. CEO of Chantico Global, Gina Sanchez took a more cautious tone. During an interview on CNBC’s Trading Nation, Sanchez talked about the perceived risk recession affecting the equity multiples: “We would make sure you temper your expectations because one of the assumptions that underlies that 3,000 point is that multiples basically stay where they are […] I’m not sure the multiple can hang in there for that long.” Essentially, the S&P can only reach 3,000 if the bulk of investors believe the market is still on the rise, a self-fulfilling prophecy of sorts.
Michael J. Wilson, equity strategist at Morgan Stanley noted that economic policy is more important to keeping the S&P on track to its 2017 target of 2,700 than the results of the policies. He hopes that equity multiples will be expanded to allow the S&P to continue to rise. Wilson wrote in a note to clients on Monday, “No matter what gets passed in the next few months, we think just moving forward with a decision on the Affordable Care Act and taxes will provide the certainty necessary for companies and individuals to act on their higher confidence readings which have remained elevated.” With that said, there is great doubt among analysts, if Congress will pass legislation beneficial to Wall Street.
For the short term, many like Erick Ormsby, CEO of Alcosta Capital Management are waiting to see how quarterly results from giants like Goldman Sachs, Bank of America, Microsoft, Qualcomm and eBay look before making an assessment. Ormsby stated “Folks are waiting to see what earnings look like […] They should be good. That should help support the market.”