Has the bull mar­ket reached the end of the road?

Financial Mirror (Cyprus) - - FRONT PAGE -

The bull mar­ket seems to be at a cross­roads at the end of 2015. Six straight years of gains have been seen, but as 2015 winds down the Dow Jones In­dus­trial Av­er­age (DJIA) has less than a week to close with the in­dex down about 1.5% and the bench­mark S&P 500 down less than 1%.

The real is­sue is not just that the bull mar­ket’s gain has gone on for over six years now. What mat­ters is ex­actly what may come to be in 2016. Elec­tion years are sup­posed to be good for the mar­kets, but the back­drop of a strong U.S. dol­lar and weak trends con­tin­u­ing in the prior growth mar­kets of China, Brazil, Rus­sia and else­where are weigh­ing down on earn­ings growth — and that is weigh­ing down Wall Street strate­gists’ expectations.

An­other is­sue is that weak en­ergy prices and weak oil and gas earn­ings are hurt­ing the over­all earn­ings power of the en­ergy sec­tor. Ditto for com­pa­nies tied to met­als and min­ing or other com­modi­ties, and com­pa­nies re­liant on high ex­ports.

The DJIA has fallen far short of an­a­lyst ex­pec­ta­tion tar­gets to de­rive a DJIA 19,142 peak in 2015. The S&P 500 In­dex closed out 2014 at 2,058.90 and was close to 2,044 last week. Keep in mind that some tar­gets are carry-over tar­gets that were made ear­lier and some of th­ese may of course change be­fore year-end or at the on­set of 2016.

The uni­verse of strate­gists was taken from the pro­jec­tions from Bank of Amer­ica Mer­rill Lynch, Cit­i­group, Credit Suisse, Gold­man Sachs, JPMor­gan, Mor­gan Stan­ley, Wells Fargo, RBC, BMO, Bar­clays, Canac­cord Ge­nu­ity, Deutsche Bank, No­mura and UBS. Again, their es­ti­mates may change be­fore year-end or in the be­gin­ning of 2016. - S&P 500 tar­get: 2,200 The firm sees a 7% to­tal re­turn

for the S&P 500 in 2016, roughly 5% in in­fla­tion­ad­justed terms. Its strate­gists be­lieved that Fed­eral Re­serve rate hikes are de­signed to en­gi­neer mod­est growth rather than to put the brakes on a run­away econ­omy, so stocks should do well, par­tic­u­larly those that can raise their div­i­dends and of­fer in­vestors a ris­ing in­come stream. The cur­rent top 10 Mer­rill Lynch stock picks for 2016 are Cit­i­group, Coca-Cola, Exxon Mo­bil, 3M, Walt Dis­ney, Eco­lab, Pfizer, Nex­tEra En­ergy, Qual­comm and Ver­i­zon Com­mu­ni­ca­tions.

Other key strate­gist tar­gets from Cit­i­group, Credit Suisse, Gold­man Sachs, JPMor­gan, Mor­gan Stan­ley and a half dozen more are fea­tured be­low. - S&P 500 tar­get: 2,200 Citi sees about 7% up­side in stocks, de­spite low­er­ing eq­ui­ties to a Neu­tral weight­ing. It also warned of an aboveav­er­age chance that the econ­omy could dip back into a re­ces­sion. That is not set in stone, but the firm is less pos­i­tive in eq­ui­ties than in the past.

Credit spreads, an earn­ings dip, met­als and trans­ports, mar­gins and low sen­ti­ment were all listed as con­cerns. - S&P 500 tar­get: 2,150 The firm sees stocks trad­ing near fair mar­ket value for the first time in about five years. It thinks this is a time to trim eq­uity weight­ings, hav­ing pre­vi­ously seen a mid2016 S&P 500 tar­get of 2,200.

Else­where, Credit Suisse sees the MSCI emerg­ing mar­ket in­dex offering roughly 15% po­ten­tial US dol­lar up­side to year-end 2016. It rec­om­mended over­weight po­si­tions on China, Korea, In­dia, Mex­ico, Malaysia and Tur­key, and the firm sees be­ing un­der­weighted in Brazil, Rus­sia, Thai­land, Philip­pines and Poland.

Credit Suisse also has been making con­tro­ver­sial stock calls: it re­moved GE from the fo­cus list, but now likes the Al­catelLu­cent/Nokia merger and is now some­how

bullish on BHP. - S&P 500 tar­get: 2,100 The Gold­man tar­get was based on 2.2% av­er­age growth in 2016 and 2017, with a P/E ra­tio of 16.2. What stood out was that the firm thinks earn­ings can grow close to 10% due to a po­ten­tial re­cov­ery of en­ergy prof­its. That means caveats, while in Novem­ber Gold­man added Ap­ple to its Con­vic­tion Buy List. - S&P 500 tar­get: 2,200 The firm sees S&P 500 year-end earn­ings per share at $123.00. That im­plies roughly 3% to 4% in the S&P’s earn­ings per share over the year. JPMor­gan expects the oil drag to fade, but it sees a strong dol­lar per­sist­ing.

It also sug­gested for its clients and in­vestors to exit many of the top mo­men­tum stocks from 2015 be­cause they have be­come crowded and ex­pen­sive. - S&P 500 tar­get: 2,175 The firm made big news pub­lish­ing its views for in­vestors to brace for a pe­riod of low in­vest­ing re­turns. It was back in Au­gust when Mor­gan Stan­ley cut its 12-month tar­get for the S&P 500 to 2,200 from 2,275, with ex­pected for­ward price-to-earn­ings ra­tios of 16.6 rather than the pre­vi­ous forecast of 17.2. It also cut its 2016 earn­ingsper-share forecast for the S&P 500 to $128.50 from a pre­vi­ous $131. Mor­gan Stan­ley expects the Fed to raise rates five times be­tween now and the end of 2016. - S&P 500 tar­get: 2,230 to 2,330 Wells Fargo car­ries a scale of tar­gets for a range rather than listing ab­so­lute num­bers. This seems more fair, al­though it makes the expectations for a low-end, mid-point, or high-end up for de­bate.

Wells Fargo has an S&P 500 In­dex op­er­at­ing earn­ings pro­jec­tion of $130 (per all

S&P 500) for 2016. - S&P 500 tar­get: 2,100 BMO expects a cor­rec­tion of some sort to ar­rive in 2016, which may lead to the first year of losses since 2008 (if 2015 doesn’t beat 2016 to the punch). This call was from the end of Novem­ber, so it could be re­freshed.

BMO also sees $130 in earn­ings per share for the whole S&P 500. Its strate­gist was more bullish than many be­fore this 2016 call, but con­cerns were around the im­pact from higher in­ter­est rates, low or lower com­mod­ity prices and lower growth in China and Europe. - S&P 500 tar­get: 2,300 RBC’s tar­get of 2,300 is more ag­gres­sive than most, but it comes with some caveats. This was from Novem­ber, but a CNBC re­port from Septem­ber showed that RBC was too bullish for 2015. At that time, the firm had cut its tar­gets to 2,100 from 2,325 for 2015.

RBC gave four top tech stock picks for 2016 at the end of Novem­ber: Adobe Sys­tems, Am­phe­nol, Face­book and Visa.

A list of other tar­gets from other firms with­out the color comes from Birinyi’s Ticker Sense. Th­ese five S&P 500 tar­gets for 2016 have not been con­firmed by 24/7 Wall St., but they were listed as fol­lows: Bar­clays: 2,200 Canac­cord Ge­nu­ity: 2,350 Deutsche Bank: 2,275 No­mura: 2,245 UBS: 2,275

With­out weight­ing any firms heav­ier or lighter due to size or con­fir­ma­tions of tar­gets, this left 14 firms on Wall Street with cur­rent price pro­jec­tions for the S&P 500 tar­get is al­most 2,218 for 2016. Again, that can and very well may change in the days and weeks ahead as strate­gists tweak their 2016 num­bers. (Source: 24/7 Wall St.com)

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