Just over a month into the year and there have been more cuts for year end targets by strategists and analysts this early in the year than ever before. Strategists and analysts are famous for their herding – but not right now. The gap between the highest and lowest strategist estimate has swelled to 325 points. This is the biggest spread at this point since 2012.
Seven of the 21 strategists tracked by Bloomberg have lowered their projections for the Standard & Poor’s 500 Index amid the market rout that wiped more than $2 trillion from prices. Fear among forecasters renowned for their unabashed bullishness adds to worries at a time when surprises are piling up, from repeated bank stock sell-off and wild swings in the price of oil. The S&P 500 is down 8 percent in 2016, the worst start to a year since 2008.
The median forecast of strategists surveyed by Bloomberg see the S&P 500 ending 2016 at 2,175, 16 percent above its closing price on Friday. The consensus estimate was 2,245 as recently as Nov. 30. Growing doubt is a departure from the past two years, when strategists mainly stuck to their bullish predictions. The optimism proved prescient in 2014, as the index rallied 16
percent from February to December. In 2015, stocks erased the first-month loss in February to reach all time-high by May, only to plunge 12 percent through August. Stocks ended last year with the worst performance of the bull market, some 8 percent below where strategists had predicted in January.
The gap between the index’s level and the average of analyst targets has grown, as the index has fallen faster than strategists have cut. At the trough of the January sell-off, the projection was 357 points higher than the index, a spread that’s been exceeded only at the bottom of the last two bear markets.