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We’re currently working on our annual outlook report, and one of the things we look at each year is Wall Street strategists’ year-end price targets.  Our view on this is that predicting where the S&P 500 is going to be one month from now is hard enough, so trying to predict where prices will be a full year from now is a fool’s errand.  Nevertheless, strategists do it, and we analyze it.  While one strategist’s prediction doesn’t hold much weight, looking at the average of all the strategist’s predictions has a “wisdom of crowds” aspect to it.

In that regards, below is a look at the average S&P 500 year-end price target of Wall Street strategists going back to the year 2000.  For each year, we show the average year-end price target and what that would have translated into in terms of year-to-date percentage change.  We also show where the S&P 500 actually ended the year in terms of price level and year-to-date change, and then we show the difference between the expected YTD change from strategists and the actual YTD change.

A couple of things stand out right away when looking at the table.  First off, there hasn’t been one year in the last 17 where strategists were collectively expecting the S&P 500 to decline.  The most bearish they’ve been was in 2005 when the average year-end price target was looking for a gain of just 2.8%.  Second, the average expected change over all 17 years has been +9.6%.  That’s 5.4 percentage points higher than the actual average annual gain of 4.2% that the S&P has experienced over the same time period.

At the start of 2016, the average year-end price target was predicting a gain of 8.4%, and if the year were to end today, they would have underestimated the market’s actual change by 2.2 percentage points.  That’s actually a very good prediction compared to most years.  The only year where strategists as a group called it closer was in 2005 when they missed the actual YTD change by just 0.2 percentage points.

The biggest misses for strategists came in years when the S&P entered bear markets.  In 2001 and 2002, strategists were looking for double-digit percentage gains, but the S&P ended up posting double-digit percentage declines.  In 2008, strategists were looking for a gain of 11.1%, and the S&P went on to fall 38.5% that year.  The biggest under-estimation came in 2013 when the consensus call was for a gain of 7.6%.  In that year the S&P rallied 29.6%, resulting in a miss of -22 percentage points.

This all brings us to 2017.  As of now, the average Wall Street strategist has a year-end price target of 2,356.  Based on the S&P’s current level, that translates into a 2017 gain of 4.2%, which coincidentally is the same as the average actual annual move that the S&P has experienced going back to 2000.  Compared to the average expected gain of 9.6% that strategists have predicted over the last 17 years, their outlook for 2017 is relatively bearish.  It would be the smallest expected gain of the entire bull market, and the smallest reading seen since 2005.

While we’ve seen wildly positive sentiment in many of the investor and consumer surveys released recently, it appears that Wall Street strategists don’t have high expectations for the stock market in the year ahead.

See additional Wall Street sentiment analysis in our 2017 annual outlook report due out this week!  Click here to learn more.

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