Ok, so it’s getting old posting about this, but with the S&P 500 Index up strongly this year to 5308 on the index, we’ve started to see Wall Street strategists increasing their year-end forecast for the index. It never fails.
Market is up = Strategists increase their year-end targets
Market is down = Strategists decrease their year-end targets
If a strategist’s year-end forecast is way under what the market is trading at (after a big rally like we’ve had this year), they often increase their year-end targets so they reduce the risk of looking way off target by the end of the year. If a strategist is much higher than what the market is trading at (a big selloff occurs), they often decrease their year-end targets. They are essentially chasing their tails.
Remember, these strategists are humans that have jobs, and neither the strategist nor the firm want to seem way off base on any forecast on any year. The strategist doesn’t want to lose their job and the firm doesn’t want to lose their clients. They’d rather have you forget what their original forecast was by the end of the year, unless they were right of course.
Just think if you were an investor following one of the strategists’ forecasts for the S&P 500, which may have had a low target to start the year. You didn’t want to take much risk and thought the S&P 500 might rally 2-3% for the year, based on the strategist’s outlook. Or even worse, the strategist forecasted negative returns for the index. Then now after a 10%+ rally in the index, the strategist increases their year-end forecast by 10%. So now they’re bullish after the market rallied?!?
Below are some of the top Wall Street firms’ changes in year-end forecasts for the S&P 500 Index, starting in December of last year, then to March, then to May this year. Those that were way under target jumped pretty quickly higher in just 3-5 months of the year. It will be interesting to see if those firms that remain significantly below the current S&P 500 index level of 5308 will capitulate higher before the end of the year.
S&P 500 Index 2024 Year-End Forecasts
Source: MarketWatch
So as an investor, either pick the right strategist to follow that guesses the correct year-end target of any market/investment each year (which you or the strategist could get wrong), or just focus on the long term.
I prefer the simple long-term approach.