2013 S&P500 Market Outlook
Wednesday, December 19, 2012
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Wall Street's equity strategists know that predicting the market's performance involves both skill and luck. This month's knotty negotiations among lawmakers over the so-called fiscal cliff -- looming automatic spending cuts and tax hikes -- greatly complicate the job of forecasting next year's market returns. Yet if there is one thing that makes market seers -- and investors -- comfortable about 2013, it is stocks' big rally in 2012. Success breeds confidence, after all, and a year-to-date advance of 12% in the Standard & Poor's 500 surely qualifies as success.
The 10 strategists recently surveyed by Barron's see more gains ahead next year. Their mean S&P prediction for Q1 / 2013 -- 1562 -- implies a 10% price gain from current levels.
If Republicans and Democrats don't reach a deal before year end on taxes and spending, news about the progress of their talks could ratchet up market volatility in coming months. But at this point, the Street's bulls are more bullish about the year ahead than they were a year ago, while the bears are relatively less bearish.
S&P 1562, IF BORNE OUT, would come within a hair of the index's all-time high of 1565, hit in October 2007. Indeed, a majority of strategists consulted have 2013 year-end targets above that peak, and some of them, at or above 1600.
Ironically, a stronger conviction about stocks comes despite the strategists' predictions of ho-hum growth next year in corporate earnings. Their mean forecast for S&P 500 profits is $108 a share, up 5% from this year's estimated $102. The seers are emboldened by other factors, however, which hampered stock prices in 2011 and much of 2012.
A year ago, November's election clouded the outlook, and the Republicans' bitter primary-season campaign had begun. Now the outcome is settled, with President Obama returning to the White House for a second term.
Worries about Europe's sovereign debt have eased significantly, as well, at least in the ability of the crisis to shock U.S. investors. The Continent's problems are far from over, given the unsustainable borrowing costs of several euro-zone members, but the whiplash-inducing anxiety on these shores is gone.
Concerns about slowing economic growth in emerging markets, in particular China, also have begun to dissipate. There are even hints in recent data that these economies have bottomed. In short, the prevailing view is that U.S. stocks will skirt around the potholes that remain.
Wall Street's equity strategists know that predicting the market's performance involves both skill and luck. This month's knotty negotiations among lawmakers over the so-called fiscal cliff -- looming automatic spending cuts and tax hikes -- greatly complicate the job of forecasting next year's market returns. Yet if there is one thing that makes market seers -- and investors -- comfortable about 2013, it is stocks' big rally in 2012. Success breeds confidence, after all, and a year-to-date advance of 12% in the Standard & Poor's 500 surely qualifies as success.
The 10 strategists recently surveyed by Barron's see more gains ahead next year. Their mean S&P prediction for Q1 / 2013 -- 1562 -- implies a 10% price gain from current levels.
If Republicans and Democrats don't reach a deal before year end on taxes and spending, news about the progress of their talks could ratchet up market volatility in coming months. But at this point, the Street's bulls are more bullish about the year ahead than they were a year ago, while the bears are relatively less bearish.
S&P 1562, IF BORNE OUT, would come within a hair of the index's all-time high of 1565, hit in October 2007. Indeed, a majority of strategists consulted have 2013 year-end targets above that peak, and some of them, at or above 1600.
Ironically, a stronger conviction about stocks comes despite the strategists' predictions of ho-hum growth next year in corporate earnings. Their mean forecast for S&P 500 profits is $108 a share, up 5% from this year's estimated $102. The seers are emboldened by other factors, however, which hampered stock prices in 2011 and much of 2012.
A year ago, November's election clouded the outlook, and the Republicans' bitter primary-season campaign had begun. Now the outcome is settled, with President Obama returning to the White House for a second term.
Worries about Europe's sovereign debt have eased significantly, as well, at least in the ability of the crisis to shock U.S. investors. The Continent's problems are far from over, given the unsustainable borrowing costs of several euro-zone members, but the whiplash-inducing anxiety on these shores is gone.
Concerns about slowing economic growth in emerging markets, in particular China, also have begun to dissipate. There are even hints in recent data that these economies have bottomed. In short, the prevailing view is that U.S. stocks will skirt around the potholes that remain.
