2019 S&P 500 Price Targets From Wall Street Strategists

As we move into 2019, the landscape of the stock market is riddled with uncertainty and speculation. Investors are keenly aware of the potential for change, particularly with the Federal Reserve expected to adjust interest rates multiple times throughout the year. This financial environment is further complicated by a decelerating housing market, rising inventory levels, and ongoing geopolitical tensions that contribute to market volatility.

For investors, understanding the trends and forecasts is vital. It’s not enough to simply speculate; we must consider where to allocate our funds wisely. This article delves into the insights and predictions from top Wall Street strategists regarding the S&P 500, aiming to provide a clearer picture of what may lie ahead for investors.

Previous Wall Street S&P 500 Forecasts for 2018

Before diving into the predictions for 2019, it’s crucial to review the S&P 500 forecasts made for 2018. As of December 2, 2018, the S&P 500 stood at 2,760 following a more tempered speech from Fed Chair Powell regarding interest rate hikes.

This backdrop illustrates a challenging year for many strategists. A number of firms like UBS projected targets of 3,150 and Canaccord even higher at 3,200, yet these projections seem out of reach as the year closes. In contrast, firms such as Morgan Stanley, Goldman Sachs, and Citigroup appeared to have made more accurate assessments, reflecting the unpredictable nature of the market.

Wall Street S&P 500 Forecasts for 2019

Now, let’s explore the forecasts for 2019 from various prominent strategists, each offering unique insights based on their market analysis.

Bearish Target: Morgan Stanley, Michael Wilson

S&P 500 Price Target: 2,750; EPS: $176 = 15.62X P/E

Michael Wilson has maintained a bearish outlook, predicting that the S&P 500 will remain stagnant in 2019. His analysis suggests we are experiencing a "rolling bear market," indicating that the index may not see significant growth. This scenario implies that risk-averse investors might find alternatives such as 12-month CDs appealing, offering a stable return without the volatility associated with equities.

Wilson’s target includes a potential bull case of 3,000 and a bear case of 2,400, showcasing the range of uncertainty present in his forecast.

Volatile Target: Bank of America, Savita Subramanian

S&P 500 Target: 2,900; EPS $170 = 17X P/E

Savita Subramanian predicts a complex year with the S&P 500 climbing to 3,000 before settling at 2,900 by year-end. This forecast reflects a modest 5.5% return from current levels, which may seem optimistic given the multiple headwinds she identifies, including trade tensions and federal deficit concerns.

Her analysis highlights the cyclical nature of the housing market and how it often precedes movements in equities by approximately two years, an insight that is particularly relevant for investors looking to understand market trends.

Moderate Target: Goldman Sachs, David Kostin

S&P 500 Target: 3,000; EPS: $173 = 17.34X P/E

David Kostin offers a more balanced approach, predicting a 5.3% return based on a target of 3,000. He advises a shift towards higher-quality stocks, emphasizing the importance of stable earnings and strong fundamentals. His focus on large-cap dividend aristocrats indicates a strategy aimed at long-term investment stability.

Kostin presents a three-scenario outlook for 2019:

• Base case: 50% probability of reaching 3,000.
• Bear case: 30% probability of falling to 2,500.
• Bull case: 20% probability of closing at 3,400.

Bullish Target: Citigroup, Tobias Levkovich

S&P 500 Target: 3,100; EPS: $172.50 = 18X

Tobias Levkovich from Citigroup offers a more optimistic outlook, suggesting a near 90% probability that the S&P 500 will rise over the year. He believes that corporate earnings guidance for 2019 has been conservatively set, creating potential for upside surprises.

While his target of 3,100 requires a significant return of 10.7%, it reflects a confidence in the resilience of corporate performance against a backdrop of uncertainty.

Super Bullish Target: Credit Suisse, Jonathan Golub

S&P 500 Target: 3,350; EPS $174 = 19.25X P/E

Jonathan Golub predicts an ambitious target of 3,350, banking on P/E multiple expansion despite anticipated deceleration in earnings growth. His forecast assumes a robust market response to potential tax changes and economic stimuli, inviting skepticism from more conservative investors.

Golub’s outlook underscores the importance of staying informed about broader economic indicators, especially as they relate to interest rates and inflation, which could significantly impact market dynamics.

Understanding Historical S&P 500 P/E Valuations

To comprehend the recent forecasts, it’s essential to examine historical P/E valuations of the S&P 500. Analysts often rely on these multiples to gauge whether current stock prices are justified by earnings.

Current P/E Valuations

Current P/E multiples have been on an upward trajectory since 2011, though they remain lower than the extremes observed during the dot-com bubble and the 2007 peak. Presently, the current P/E is hovering around 20-21X, placing it in the middle of the historical range over the past two decades.

Forward P/E Valuations

There has been a significant compression in forward P/E multiples, which decreased from approximately 22X at the beginning of 2018 to around 17X by the end of the year. This decline indicates a shift in market sentiment regarding future earnings growth.

According to FactSet, the current forward 12-month P/E ratio for the S&P 500 stands at approximately 16X, aligning closely with the 5-year average but still above the 10-year average of 14.5X. This suggests a cautious outlook among investors as they adjust their earnings expectations for the coming year.

Strategies to Protect Your Wealth

In light of the current market volatility, it is vital for investors to reassess their risk exposure. Considering the diverse range of forecasts, maintaining a balanced portfolio is essential. One effective way to monitor your financial health is by using tools such as Personal Capital, allowing you to visualize your investments and plan for retirement effectively.

By staying informed and proactive about your financial strategies, you can navigate the complexities of the market with greater confidence.

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