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Stock gains to continue in ’18, Credit Suisse says

The bull market turns 9 in March, and Credit Suisse’s newest stock strategist is predicting the party on Wall Street will continue in 2018.

Jonathan Golub, who joined CS this summer after a similar job at RBC, has set a year-end 2018 price target of 2,875 for the Standard & Poor’s 500 index, which is more than 13% higher than its current level of 2,550.

Golub is betting the large-company stock index, which has notched 43 record highs this year and is up about 14%, will make more new highs next year.

His market call suggests that the broad U.S. stock gauge still has 10%-plus upside.

The market math he built his bullish thesis on assumes corporate earnings growth of 6% to 7% and the willingness of investors to pay even higher prices for the single-digit-percentage earnings gains.

He notes that the market’s current price-to-earnings ratio — a common metric used to measure how richly valued the market is — of 18 is a concern for many investors but thinks the P-E multiple will rise further.

“With recessionary risks contained, volatility depressed and ( bond yields still low), we see upside to multiples,” Golub wrote in a report, Further Upside in 2018 and Beyond.

His favorite sectors include “new economy” stocks in the tech and consumer discretionary sectors, as well as financials, which he says will benefit from a higher interest rates and less regulation.