As we near a close to 2015, it is time to look forward to 2016. We have done this in 2014 and 2015, so it is becoming a tradition to see which strategists did well and which missed the mark. What do the experts think will happen in 2016 and should we even care.
Perhaps you are familiar with Philip Telock’s landmark UC Berkeley study that looked at 82,000 predictions over 25 years by 300 leading economists. It turned out that their so called expert views were no better than random guesses, and worse, the more famous, the less accurate the prediction.
Last year the strategists predicted a weak bull market for 2015, but it turned out they were still too optimistic. Their average forecast was for a 6% gain in the S&P 500 to 2218. However as of today the S&P 500 stands at 2074 which is down slightly from its 2089 close at year end 2014. The two that were closest to the mark were Goldman’s David Kostin and Barclays’ Jonathan Glionna who both forecast a year end close of 2100.
Predictions for 2016
After looking at all the Wall Street reports, I compiled the predictions from 12 top stock market strategists. For 2016, the average price target for the S&P 500 is 2215 or a 6.8% return. Let’s take a look at the forecasts and I’ve also included their predictions from last year so you can see if they are more bullish or bearish.
The Best Forecasters in 2015 Diverge in 2016
While Kostin and Glionna were the best forecasters in 2015, their views have diverged a bit for the year ahead. Let’s take a look at their reasoning.
Goldman’s Kostin thinks it will be deja vu all over again as his S&P target is 2100 as it was a year ago. He believes that rising rates will compress PE multiples.
Fed hikes will begin in December and continue steadily for several years. When investors realize tightening will be more sustained than most expect, the P/E multiple will contract and offset the positive impact of higher EPS.
