5 Top Strategists Discuss Near-term Outlook for S&P 500 and US Equities

May 16, 2022 7:04 AM EDT
Get Alerts SPY Hot Sheet
Price: $377.25 -0.81%

Rating Summary:
    0 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 25 | New: 35
Join SI Premium – FREE

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.

The S&P 500 had another rough week with the US benchmark stock index falling 5.2%. Consumer Staples was the best-performing sector (down 1.1%) while Consumer Discretionary was the worst-performing sector (-8.4%).

Here are comments from 5 strategists on what we can expect from the S&P 500 in the near term.

Goldman Sachs’ David Kostin (lowers S&P 500 price target to 4300 from 4700): “Although S&P 500 firms posted much better-than-expected 1Q EPS growth of 11%, investors have been mauled by a 18% near-bear market plunge since the index peaked on January 3rd. We boost our 2022 EPS growth forecast to +8% (from +5) and maintain our 2023 growth estimate of 6%. Our sales, margin, and EPS estimates remain below bottom-up consensus. We cut our year-end target to 4300 (from 4700) to reflect higher interest rates and slower economic growth than we previously assumed. Our new baseline forecast assumes no recession and implies the P/E ends the year unchanged at 17x. A recession would see the index fall by 11% to 3600 as the P/E drops to 15x. Focus on high vs. low margin growth stocks.”

Morgan Stanley’s Michael Wilson: “With valuations now more attractive, equity markets so oversold and rates potentially stabilizing below 3%, stocks appear to have begun another material bear market rally. After that, we remain confident that lower prices are still ahead. In S&P 500 terms we think that level is close to 3,400, which is where both valuation and technical support lie.”

Canaccord Genuity’s Javed Mirza: “A sharp short-term (1-2 week) counter-trend bounce is an opportunity to reduce exposure in risk assets. The weakening technical profiles of most cyclical sectors and the Market Cycle Model suggest further downside potential of 5 – 15% in equity markets. In our view, a move into bear market territory (-20%) by the bulk of the Goliaths [e.g. AAPL, AMZN, FB, GOOGL, NFLX, TSLA] would constitute an attractive long-term entry point, with the caveat that this is within the context of a secular bull market in equities.

UBS’ Keith Parker: “Although Fed tightening is a certainty, the growth outlook is highly uncertain. Our logit model suggests the equity market is pricing a 40% chance of a recession by year-end (85pctl). Indeed, we estimated <3800 as a level at which the S&P 500 is priced for an economic and earnings recession.”

BTIG’s Jonathan Krinsky: “We think a bounce towards 4,200 makes sense as we enter a summer chop, but ultimately think there is unfinished business down to 3,400-3,500 later this year consistent with the mid-term election cycle seasonal pattern.”

By Senad Karaahmetovic

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments, Hot Comments, Hot List, Trader Talk

Related Entities

UBS, Goldman Sachs, Morgan Stanley, Standard & Poor's, Earnings, Canaccord Genuity, BTIG, Senad Karaahmetovic