Best and Worst Stock Market Scenarios for 2017

It would be wise for investors to cover all bases when it comes to stocks in 2017. Predictions made by Wall Street for the new year includes “base case” for a gain amounting to five percent for stock markets. However, when one delves a little deeper, it is found that the American stock market may actually decline anywhere from 10 percent to 30 percent. To balance, a bullish version of the market predicts that the stock market will zoom up by 20 percent in 2017.

Lesson from 2016

In its report, UBS Wealth Management has outlined an important lesson gleaned from 2016. A base case must not be confused with surety. It is a fact that 2016 has not been a good year when it came to base case forecasts. The report then cited the winning of Donald Trump in the presidential election. It also mentioned Brexit and the fact that central banks all over the world were compelled to ease policy much more than what previously was thought necessary. According to Savita Subramanian of Bank of America Merrill Lynch, the bull case and bear case are different from S&P 500 base case touching 2300 at the end of 2017. This base case is dependent on the ability of policymakers to provide growth in 2017.

Price targets set

Strategists have set price targets for 2017 year-end in the S&P 500 index. Wall Street firms envisage the stock gauge of large caps moving up to 2363, on an average. This equals a 5.5 percent gain from December 30’s year end 2239. This percentage is made on the assumption that corporate profit growth and economic recovery will increase in speed, assisted by the renewed optimism among investors post Donald J. Trump winning the election. Both analysts and investors have high hopes when it comes to growth-friendly platforms promised by the President-elect during his campaign. The newly minted Republican President-to-be has promised lower corporate taxes and less business regulation. He has also promised substantial infrastructure spending leading to a positive turn in the investor sentiment.

Many strategists, however, have also laid out the worst case scenario or a “bear case”. They are of the opinion that the Standard & Poor 500 may end 2017 down by about 10 percent. This can be termed as a correction. The market may even plunge to 30 percent. This would push it into the bear market zone.

Leave a Comment