Investing

Initial 2019 S&P 500 Targets From Barclays, Citi, Goldman Sachs, Merrill Lynch and Others

Jon C. Ogg

Published: November 26, 2018 10:05 am

Last Updated: January 11, 2020 2:31 pm

With the worst Thanksgiving stock market week in many years having capped some serious negativity in the stock market, December and year-end are now just around the corner. Despite the markets not yet getting to see how December will turn out, many Wall Street firms have issued their preliminary targets for the S&P 500 Index and made other market observations for 2019.

24/7 Wall St. has collected the outlooks and targets from many of the major firms on Wall Street. These outlooks and forecasts are partial snapshots from Barclays, BMO, Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS.

Investors should consider that these targets are still rather early for the 2019 outlook and may change before the end of this year. It is also possible that more updates have been issued that have not been compiled over recent days with the extra market volatility.

Barclays has set its SP 500 target at 3,000 for 2019. Keep in mind that the firm’s 2018 year-end price target for the index was just 2,900 earlier this year. The materials sector was raised to an Overweight rating, and the newly redefined communications services sector was given an Equal Weight rating. The firm’s view on financial services was lowered to Market Weight from Overweight, and the industrials sector was lowered to Underweight.

BMO Capital Markets still values the S&P 500 at 2,950 in 2018, and its target for 2019 is currently 3,150.

Citigroup has set a 2018 target for the index at 2,800, and it was given a 3,100 target for the end of 2019.

Credit Suisse has one of the most bullish S&P 500 outlooks, with 3,350 for the end of 2019. Its 2018 fair value was 3,000.

Goldman Sachs is calling for the S&P 500 to reach 3,000 with a 50% probability by the end of 2019, compared with a 2,850 fair value for 2018. The firm known as “Golden Slacks” suggests that all investors (large and small) should raise their cash levels, now that cash is offering a competitive view to stocks for the first time in many years. The firm also noted that investors should buy defensive stocks and sectors for 2019 as recession fears are expected to increase. It recently raised its view on utilities to Overweight, and it noted that the broader market could face serious headwinds if the full 25% tariff is set against all China imports. Goldman Sachs even suggests a 30% probability that the S&P 500 could head south in 2019 to a level of 2,500. Its larger upside target, with just a 20% probability, is 3,400 if trade issues are rectified and if economic growth continues higher than its base case.

JPMorgan’s S&P 500 outlook for 2019 has not yet been seen, but the prior fair value for 2018 on the S&P 500 was 3,000. The firm did recently slash its Brent Sea crude forecast to $73 per barrel for 2019, down from a prior target of $83.50 per barrel.

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Merrill Lynch has become more cautious and its strategist, Savita Subramanian, thinks the stock market may have peaked in 2018. Its 2018 year-end fair value on the S&P 500 remains 3,000, but the firm now suggests a 2,900 target for 2019. The firm, similar to Goldman Sachs, sees cash as competitive and likely to grow now that cash outyields 60% of the S&P 500. The firm also sees short rates rising to 3.5% by the end of 2019 (versus 1.9% for the S&P 500). While the firm suspects that a peak is expected in equities, bearish positioning and weak sentiment also present large upside potential if the trade and tariff risks subside.

UBS currently expects that the S&P 500’s weakness in 2018 will set the stage for larger gains in 2019. UBS’s base case for the S&P 500 is currently 3,200 in 2019.

The 2018 forecast from 24/7 Wall St. called for a fair value of 26,400 or higher for the Dow in 2018, while the current level is 24,400, with a 52-week and all-time high of 26,951. Our initial forecasts for 2019 will be issued in December after the dust has settled (hopefully) in the markets.

With several firms having a 2019 fair value average of 3,000 or so for the S&P 500, it’s important to keep in mind that the index already hit a high of 2,940.91 so far in 2018. That said, the S&P 500’s current level of 2,640 or so is down about 10.2% from its peak.