Tallahassee Journal

2016 stock outlook: Up but not up and away

2016 stock outlook: Up but not up and away

Wondering where the suddenly erratic U.S. stock market is headed in 2016? First, the good news: Not a single Wall Street stock strategist is calling for a bear market, or 20% drop. If they are right, the bull market will turn seven in March and stocks — which have tripled in value since March 2009 — will keep chugging higher. What’s more, “flat” may not necessarily be “the new up,” as one pundit predicts. The Standard & Poor’s 500 index could post returns that eclipse its long-term average gain of 10%, a bull says.2013-11-04T131020Z_8_CBRE99U0VX000_RTROPTP_3_MARKETS-STOCKS_original

Now, the not-so-good news: There’s a chance investors will see a replay of 2015 and the market could again trade sideways and deliver almost flat returns. That’s the takeaway from year-end 2016 S&P 500 price targets from 17 Wall Street strategists. The predictions range from a high of 2360 — or 15.5% above Thursday’s close of 2044 — to a low of 2100, which equates to a gain of just 2.7%. The S&P 500 finished 2015 with a 0.7% loss for the year. The average 2016 price target is 2215 — which is lower than the average 2015 price target of 2225 — and which would add up to a solid but unspectacular return of 8.4%. Potential headwinds next year include more rate hikes from the Federal Reserve, tepid global growth, the U.S.presidential election and a still strong dollar and weak commodity prices.

Predicting where the stock market will end in any given calendar year is an annual Wall Street rite. It’s a part-art, part-science exercise with questionable accuracy but an undeniable appeal to investors. Wall Street’s predictions at the start of 2015 fared poorly. The average price target for this year was 2225 (or a gain of 8.1%), which was overly optimistic. The most accurate predictions for 2015 came from David Kostin of Goldman Sachs and Jonathan Glionna of Barclays, who both had year-end targets of 2100, just a tad above Thursday’s close of 2044.

The 2100 level is also the lowest forecast for 2016. The call for just a 2.7% gain next year is shared by Kostin (who says “flat is the new up”), Barry Bannister of Stifel Nicolaus and Brian Belski of BMO Capital Markets. Since average returns aren’t sexy, let’s look at the most bullish — and most conservative — forecasts.