With the S&P 500 Index staging an improbable 16% advance this year, being both bearish and wrong is making life awkward for the people paid to predict where equities will go next. After being blindsided by the resilience of the US economy thus far, humility is the order of the day for the sell-side pros that remain at loggerheads on what’s ahead.
No wonder some equity analysts are sounding a little defensive, hoping their prognostications will be vindicated soon enough as hawkish Federal Reserve policy bites. Others are issuing words of humility to clients, expressing their temptation to nudge targets higher as the tech megacaps names surge higher.
Narrow leadership, recession risk and downward earnings revisions are some of the key concerns leveled by skeptics. Plus, in the second half of the year something big could break in markets, or in the consumption and investment cycle—vindicating those currently cautious on risk assets. Yet, at least for now, the market continues to power higher and data suggests the economy can avoid a recession.
“As enticing as it may be to follow the tape and nudge our year-end target higher, we just do not see the fundamental justification for this, yet,” he said. “The worst quadrant to be in when you work at one of those firms is bearish and wrong because you didn’t really enable your upside capture for clients,” said Parker, who now heads up Trivariate Research. “I’ve been there, and I lived in all four quadrants—it’s a hard place to be.”