Wall Street Strategists Predict the S&P 500 and Top Sectors for 2019

JPMorgan’s S&P 500 outlook for 2019 has not yet been seen, but the prior fair value on the S&P 500 for 2018 was 3,000. The firm did recently slash its Brent Sea crude forecast to $73 per barrel for 2019, down from a prior target of $83.50 per barrel.

Merrill Lynch has become more cautious and its strategist, Savita Subramanian, thinks the stock market may have peaked in 2018. Its 2018 year-end fair value on the S&P 500 remains 3,000, but the firm now suggests a 2,900 target for 2019. The firm, similar to Goldman Sachs, sees cash as competitive and likely to grow now that cash outyields 60% of the S&P 500. The firm also sees short rates rising to 3.5% by the end of 2019 (versus 1.9% for the S&P 500). While the firm suspects that a peak is expected in equities, bearish positioning and weak sentiment also present large upside potential if the trade and tariff risks subside.

Morgan Stanley had been very bullish in 2017 and then went to a cold outlook in 2018. The firm’s Mike Wilson sees the volatility and stagnation of 2018 being followed by more of the same in 2019. Morgan Stanley’s 2018 and 2019 S&P 500 targets are 2,750. The firm’s note also noted a 50% chance of a modest earnings recession in 2019, and the firm was known this year for calling for rolling bear markets wherein the S&P 500 trades in a range of 2,400 to 3,000. On last look, the firm was overweight in the financial, energy and utilities sectors, and it was underweight consumer discretionary and technology.

UBS currently expects that the S&P 500’s weakness in 2018 will set the stage for larger gains in 2019. UBS’s base case for the S&P 500 is currently 3,200 in 2019.

Wells Fargo’s Investment Institute basically has said that the easy money in the stock market has been made. With 15% annualized average returns in the S&P 500 over the past decade, the firm is now targeting 6% to 7% in equity returns in 2019, if dividends are included. Surprisingly for a lower outlook, the sectors with growth expected to do best are in financial, information technology and industrials, while health care and consumer discretionary sectors are viewed favorably. The energy sector is viewed unfavorably, and West Texas Intermediate crude is viewed fairly valued between $60 and $70 rather than up at $80 or down at $50. One target was recently seen.

The 2018 forecast from 24/7 Wall St. called for a fair value of 26,400 or higher for the Dow in 2018, while the current level is 24,400, with a 52-week and all-time high of 26,951. Our initial forecasts for 2019 will be issued in December after the dust has settled (hopefully) in the markets.

With several firms having a 2019 fair value average of 3,000 or so for the S&P 500, it’s important to keep in mind that the index already hit a high of 2,940.91 so far this year. That said, the S&P 500’s current level of 2,640 or so is down about 10.2% from its peak.