Thursday, April 5, 2012

Stock Market: Why The Banks Are Wrong

Zeitgeist rules and its name is pessimism. "Bespoke", a stock market service provider, shows the current year-end S&P 500 price targets of the of the biggest U.S. banks (bespokeinvest). The average of these Wall Street strategists expects that the index closes at year-end at 1362 points. This would be minus 2.51% from the current level!

The most gloomiest bank in this survey is Morgan Stanley. Their strategist have just a target of 1167 points, meaning minus 16.46% from now. HSBC is not much better, they call 1250 points, translating in a loss of 10.52%. Goldman Sachs also is betting on 1250 points.

Even the bulls are cautious at best. The most optimistic target comes from UBS with 1475 points, meaning just a plus of 5.59%. The second place goes to Credit Suisse with 1470 points and a plus of 5.23%. It may be a coincidence that both banks have their headquarters in Switzerland. JP Morgan, the most optimistic Americans in this survey, follows with 1430 points, a pathetic plus of 2,37%. Citigroup expects 1425 points, meaning a gain of 2.01%.

I reckon that these strategist are way to pessimistic. They are following just the skeptical herd. I stick still to my belief (published here on 12.31.2011 driveby) that the S&P could gain in the whole year 30% and more and could close north of 1700 points. I still claim that the U.S. economy will stay on its recovery track guided by decent consumer spending and growing manufacturing, thanks to the rising exports to China and other emerging markets. I still believe that China will manage its soft landing, meaning that the economy will re-accelerate in the turn of the year. I still believe that the crisis in Europe will heal and Germany and other leading countries in this region will finish the year in a better shape than now.

Many funds are still under-invested and the administrators are under performance pressure. The interest rates are still pretty low and will continue to accommodate the economy upswing and the continuing rally in the stock markets. Globalization and accelerating technological revolution (iPads will deliver ongoing headwinds and the rising productivity will drive company profits further north. Enjoy!

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