As 2014 draws to a close, analysts are looking ahead for what to expect in the coming year. One of the big questions that they are confronting is whether or not the bull market that we are currently in will continue and if so will it be as strong as years past. For the most part, these analysts have zeroed-in on a range but only time will tell if they are correct.
Goldman Sachs Group Inc. (NYSE: GS) now sees the S&P 500 Index hitting 2,100 by the end of 2015.
The most important theme that Goldman Sachs was forecasting, at least by our take, is similar to what Bill Gross has warned about previously, and not just in his first Janus investment outlook commentary: investors and savers are going to have to learn to live in a low-return world. Should that say “keep living in a low-return world?”
Goldman Sachs hits mainly on the points of Low Volatility, Rising Interest Rates, and Improving European Stocks:
- Volatility is expected to remain low, and it means that market sell-offs should be bought rather than sold, if we should see another event similar to mid-October
- The Fed is expected to raise interest rates relatively later than sooner, perhaps by September of 2015, the firm expects to see the 10-year Treasury yield rising from roughly 2.30% to or above 3.0% by mid-2015.
- Goldman Sachs does not believe the expected strength coming in 2015 is reflected in the market yet. The firm noted the potential effects of a European Central Bank round of quantitative easing.
Bank of America Corp.’s (NYSE: BAC) Merrill Lynch set a price target for the S&P 500 at 2,200 for the end of 2015. Stocks are expected to remain more attractive than bonds but it is unclear how they would match up compared to another asset class. Resulting from the bull market in stocks and the bear market in equities, gold and oil are now considered cheap versus stocks on a historical basis. Merrill Lynch’s earnings forecast implies a healthy 6% growth rate and would comment that the bull market is not yet over — but it is a time to be more selective.
ALSO READ: The Best Stocks of 2014 Part 1: Materials, Consumer, Health, Industrials
In terms of actively managed funds for this year, Merrill Lynch believes that crowding was a significant driver of underperformance and this may have been exacerbated by the continued shift toward passive investments. Looking forward, ailing active manager performance along with increasingly onerous industry regulations that stifle credit availability may result in further outflows from active strategies.
Other analyst predictions for the S&P in 2015 were:
- Oppenheimer’s John Stoltzfus sees the S&P 500 going to 2,310 at the end of 2015.
- UBS’ Julian Emanuel sees the S&P 500 hitting 2,225 in 2015.
- Wells Fargo has a 2015 S&P 500 Index target range of 2,150 to 2,250.
ALSO READ: The Best Stocks of 2014 Part 2: Financial, Tech, Transport, Utilities
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