Credit Suisse Downgrades S&P 500 and GDP Targets for ’11 and ’12 (SPY)

The firm has cut the target to 1,180 from 1,220 for 2011.  With a most recent close of 1,185, Credit Suisse is opining that today’s levels are where we’ll be at year-end.  For 2012, the S&P 500 target was cut to 1,260 from 1,300 and that implies expected equity gains of about 6.3%.  U.S. growth was also downgraded to 0.7% from 1% just two weeks ago.

Where the problem arises, outside of low return expectations, is that the firm has joined the recession bias camp saying “The probability of a mild recession has risen… We think the probability of a mild recession has increased from 20% to 25%.”  Several issues were cited: European targets are now flat to -1% for GDP; global food prices are still high; political leadership is poor in the E.U.; higher risks in U.S. policy; a hawkish Japan; and a continued tightening action from China.

SPDR S&P 500 (NYSE: SPY) may be in for a flat year-end from today’s $119.00.  We have also looked at the curse of September with an outlook for this year.

In short: more caution, less conviction, no catalysts… In reality, this report is one that you could argue is half-empty or half-full.  The bias of the current market leans toward the ‘half-empty’ view.

JON C. OGG