The rise of stock prices has belied all expectations. The Standard & Poor 500 has already crossed the freshly calculated full-year forecasts made by many Wall Street analysts. As per the CNBC strategist survey, the average target for 2018 end is presently 2,975. This is a six percent up from the present levels.
The rise in stock prices has come after the tax bill was passed which sliced the rate of corporate tax from the former 35 percent to the present 21 percent. The S&P 500 has added five percent from the first day of January. It broke multiple targets on January 16 and now heads to break even more targets at 2,850 level. January 17 witnessed a jump of 20 points, surpassing 2,800, post the sell-off on January 16. About 50 percent of strategists have set targets in the region of 3,000 or more than that.
Scott Wren, the strategist at Wells Fargo Investment Institute, pointed out that the markets are acting silly. He pointed out that gains made when the stocks went up sharply on January 16 were wiped out by erratic trading. The 2018-end target of about 2,850 can now be easily reached. Wren, however, says that there contains an upside risk to the whole scenario. A strong possibility exists of getting the GDP number wrong and also inflation continues to be down. The Fed then does not do anything. This scenario would push stocks higher. An upside risk may also exist if the earnings estimate becomes low along with the GDP. He has estimated a GDP forecast of 2.9 percent in 2018.
Words of caution
The big question is whether the numbers will be moved up by the strategists, similar to what was done in 2017. This was done at the time when the S&P went up by almost 20 percent as the previous year dialed to a close. Many analysts have predicted that 2018 will be a choppy year for the markets. Proof of this is hinted when the S&P went to 2,807 before reverting to 2,776.
This does not mean all are hunky dory. A few forecasters remain steadfast in their targets, even as the market has already surpassed the numbers. Mike Wilson of Morgan Stanley is one of them, continuing to adhere to the December 1 target of 2,750. He, however, has almost conceded that the market could end much higher. His next forecast estimate is 3,000.