The relentless sell-off in U.S. stocks has forced Wall Street’s biggest bull to step back.
Jonathan Golub at Credit Suisse, whose 2019 forecast of 3,350 for the S&P 500 was the highest among all strategists tracked by Bloomberg, just scrapped that target. While his new prediction, at 2,925, is below the consensus, it represents about a 15 percent gain from current levels.
From economic growth to corporate earnings, little has changed for Golub, the firm’s chief U.S. equity strategist. He’s sticking to per-share profit estimates for S&P 500 companies: $174 for next year and $185 in 2020. What’s prompted the downward revision is the slump that stocks have failed to shake off since October. Down 13 percent, the benchmark index is heading for the worst quarter since 2011.
“Our lower price target reflects recent volatility, rather than a change in fundamental backdrop,” Golub wrote in a note to clients. “The expected trajectory for EPS and the economy remain virtually unchanged during the recent market disruption.”
Golub joined a growing list of Wall Street forecasters who have been forced to scale back their optimistic market calls amid the equity tumult. Sanford C Bernstein & Co. strategist Noah Weisberger this week trimmed his 2019 target to 2,950 from 3,150. Tony Dwyer at Canaccord Genuity, who previously saw the benchmark ending next year at 3,360, has reduced his forecast to 3,200.
The reductions came after their forecasts for 2018 proved too optimistic. At the start of the year, strategists on average predicted an 8 percent gain by December. With the benchmark gauge down almost 5 percent for the year, they’re poised to have overestimated the market’s performance by the most since the 2008 global financial crisis, according to data compiled by Bloomberg.
Like his counterparts at Goldman Sachs and JPMorgan, Golub doesn’t view the equity rout as justified by business fundamentals. Growth will slow, but the deceleration will be “benign,” he said. As the Federal Reserve signals a softer stance on interest rates, an end to the tightening cycle will be “a meaningful catalyst” for the market, according to Golub.
“The recent market disruption is not driven by fundamentals,” he wrote. “Stocks will re-rate in the year ahead as volatility subsides and the Fed concludes its rate hike cycle.”
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