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As Bloomberg noted, the average Wall Street strategist expects the S&P 500 to gain 10% next year. While expectations of such gains are common in a year when stocks crashed (strategists expect stocks to bounce back next year), they are uncommon when stocks did well this year. In other words, Wall Street strategists are chasing the rally right now and predicting that it will continue.
Their track record is poor.
There were only 5 other years in which analysts expected the S&P to rally >5% while the S&P was close to a 1 year high (i.e. analysts weren’t bullish simply because they were expecting a post-crash rally).
This is not a good sign for stocks next year. Perhaps analysts feel optimistic because IPO’s are booming like it’s 1999?
As Bloomberg noted, the average Wall Street strategist expects the S&P 500 to gain 10% next year. While expectations of such gains are common in a year when stocks crashed (strategists expect stocks to bounce back next year), they are uncommon when stocks did well this year. In other words, Wall Street strategists are chasing the rally right now and predicting that it will continue.
Their track record is poor.
There were only 5 other years in which analysts expected the S&P to rally >5% while the S&P was close to a 1 year high (i.e. analysts weren’t bullish simply because they were expecting a post-crash rally).
- December 2006: the bull market ended in 2007
- December 2007: massive bear market in 2008
- December 2014: stocks tanked in August 2015
- December 2015: stocks tanked immediately in January 2016
- December 2017: stocks experienced heavy volatility in 2018, with a crash in Q4 2018
- Now
This is not a good sign for stocks next year. Perhaps analysts feel optimistic because IPO’s are booming like it’s 1999?