One of Wall Street’s biggest bulls just got a little more bearish on the stock market.
Jonathan Golub, chief U.S. equity strategist for Credit Suisse, revised his S&P 500 (^GSPC) target for the year-end 2019 to 2,925, representing about 15% upside from current levels.
However, the revision marks a more than 12% reduction from his previous target of 3,350, which had been the most bullish prediction on Wall Street at the time.
“This reflects our view that the recent market disruption is not driven by fundamentals, and that stocks will re-rate in the year ahead as volatility subsides and the Fed concludes its rate hike cycle,” Golub wrote in a note Tuesday.
Golub maintained his earnings per share target for 2019 and 2020 unchanged at $174 and $185, respectively, even in light of the price target reduction.
“Our lower price target reflects recent volatility, rather than a change in fundamental backdrop,” he noted.
Equity volatility has more than doubled since late September, leading stock prices to tumble about 13% over the past three months. This has given rise to decidedly more bearish sentiment among analysts for the coming year.
According to Morgan Stanley’s Michael Wilson – who carries an S&P 500 target of 2,750 for the year-end 2019 – equities are in a “rolling bear market,” as the forward price-earnings multiple for the S&P 500 fell 18% at the end of October from its peak in December 2017. And based on Bank of America Merrill Lynch’s U.S. equity strategist Savita Subramanian, the S&P 500 is poised to drop to 2,900 by the end of 2019 from 3,000 at the end of this year. The S&P 500 is lower by about 4% for the year-to-date.
Based on Golub’s estimates, the S&P 500 will end 2018 at 2,546, nearly unchanged from Monday’s closing price.
However, although Golub’s forecast for the S&P 500 in 2019 is less rosy than before, he still characterizes the deceleration for the coming year as “benign.”
“2018 experienced above-trend EPS and GDP growth driven by tax changes, government stimulus, and other non-recurring items. 2019 will likely see a deceleration toward more sustainable trend levels of 2.5% GDP and 6 to 7% EPS growth,” Golub said. “Importantly, with recession risks well-contained, such a backdrop should be more than sufficient to propel the market forward.”
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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