Bulls and Bears – Tug of War

By Dima Kulakov

At the peak of the global pandemic, markets all over the world experienced a crash steeper than the 2007-2008 financial crisis. For instance, the S&P 500 (a US stock market index commonly considered the best representation of the US stock market as a whole), measuring the performance of 500 large companies listed on stock exchanges in the United States) went from its peak level of 3373 in February, to its two-year low level of 2237 (a 34% collapse!), in just one month, dipping into a bear market territory, the quickest such drop in history. 

However, the market has furiously rebounded since its mid-March low, reaching a level of 3211, just about even for the year. Because of this unprecedented market capitulation, followed by a V-shaped recovery of the indexes, experts have a wide variety of predictions for the year-end S&P level. 

Below is the table of these predictions from top investment banks, compiled by CNBC.

Firm	Strategist	2020 Year-End S&P Target
Barclays	Maneesh Deshpande	2500
Bank of America Merrill Lynch	Savita Subramanian	2600*
Citigroup	Tobias Levkovich	2700
Credit Suisse	Jonathan Golub	2700
RBC	Lori Calvasina	2750
UBS	Francois Trahan	2850
Wells Fargo Investment Institute	Darrell Cronk	2900
BTIG	Julian Emanuel	3000
Canaccord Genuity	Tony Dwyer	3000
Goldman Sachs	David Kostin	3000
Morgan Stanley	Mike Wilson	3000
Deutsche Bank	Binky Chadha	3250
JPMorgan Chase	Dubravko Lakos-Bujas	3400
CFRA	Sam Stovall	3435
Average		2,935
Median		2,950

Analysts calculate their predicted index levels based on their forecasts of the earnings of the companies included in the index. It is now difficult to estimate those earnings since the global economy has been frozen by the isolation measures put into place. Some businesses like airlines, hotels, etc. achieve almost no earnings, which has never happened before. Because of the possibility of a second wave of COVID-19, the market could take another downwards turn. As can be seen, 11 of 14 analysts predict for such a correction. However, if a vaccine can be produced on a large scale, the market will surely continue in a rapid upwards trend, consistent with 3 of the 14 predictions. Additionally, the U.S., November Presidential election will become a large factor, contributing to market volatility and potentially, to this year’s final S&P 500 level. 

Overall, under these unusual circumstances, it is almost impossible to accurately predict the year-end S&P level. It will be interesting to see, however, which firms and analysts come closest to correctly forecasting the 2020 final S&P target.