about 2 years ago • 1 min
Stocks have had a tough start to the year – particularly in the US, where the benchmark S&P 500 has dropped 4.9% through Wednesday.
But despite the losses, Wall Street strategists have actually increased their average year-end forecasts for the S&P 500 from 4,950 to 4,982 since December, according to a survey released this week by Bloomberg.
The chart above shows how the two trends of declining stocks and increasing Wall Street optimism means the S&P 500 is currently trading 453 points below the average strategist forecast. Just three months ago, the index was trading at a record 401 points above forecasts.
As the blue circles indicate, the S&P 500’s discount to forecasts has only been bigger on four occasions – and there are two paths we could take from here: one bullish and one more bearish.
Either – as in March 2020 and December 2018 – stocks rebound and swiftly catch up with where Wall Street thinks they should be. Or – as in the market routs of October 2008 and April 2001 – stocks will continue to slide for many months and the gap will only narrow once strategists start cutting their projections to adjust to the new reality.
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