Record S&P 500 still short of analyst forecasts

TradingPub Admin | April 1, 2013

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Interested in picking up some stock trading education related to analyst forecasts? If you think that the S&P 500 Index might still have further room to climb after reaching a new record value at the end of March, you might want to know that the group of stocks is still below the predictions of these market experts, according to Bloomberg. 

New record level
The benchmark index rose to a new high of 1,569.19 on Thursday, March 29, The Los Angeles Times reports. This new record came as a result of the S&P 500 Index continuing to enjoy the sharp appreciation that started in 2012, as the group of stocks surged 13.4 percent that year and then another 10 percent in the first quarter of 2013. 

Sharp appreciation has not been enjoyed by the S&P 500 Index alone, as the Dow Jones Industrial Average reached a new record in March 2013 and rose 11.3 percent during the first three months of the year, according to the news source. 

Analyst forecasts
Even with these sharp increases, the S&P 500 is approximately 5 percent lower than the mean predictions provided by market analysts, according to data compiled by Bloomberg from as far back as 2006. 

It is important to note that while the benchmark index is still valued below the estimates of these experts, there is a dispute between bulls and bears as to what the difference between valuations and actual levels means, the news source reports. 

"The market has moved so fast, it hasn't given the analysts time to re-evaluate things," Malcolm Polley, who is responsible for the oversight of $1.1 billion as chief investment officer at Indiana, Pennsylvania-based Stewart Capital Advisors LLC, told the media outlet during a March 26 phone interview. "As we just finished earnings season and we're winding down the first quarter, analysts will begin the process of reassessing."

Expected short-term weakness
The Los Angeles Times reports that many market experts believe the S&P is due for a small correction in the near future since it has not suffered such a temporary setback since fall 2012. 

"The pace should begin to slow down," Russ Koesterich, chief investment strategist at BlackRock Inc., told the news source. "There are a couple speed bumps ahead." 

Expert concerns
The BlackRock expert is not alone in his concerns. Some analysts are concerned that equities might have become overpriced due to their sharp gains in the recent past, and Howard Ward, chief investment officer at Gamco Investors Inc., which is based in Rye, New York and has $36.7 billion under management, told Bloomberg that a lot of these individuals are wary. 

"Many analysts and strategists have been skeptical of the market's advance and staying power, they know we are in record territory and they don't want to appear overly positive like many did in 2000 and 2007," he told the news source. "I would view analyst skepticism, to the extent it exists, as a contrary indicator for the market." 

Potential for gains
While many market experts have expressed their concerns about equities possibly being overpriced, there is data to support the idea that the current rally in stock prices could continue for some time, according to The Los Angeles Times. 

The most drawn-out bull market happened in the 1990s along with the tech boom, but there were several of these rallies that lasted for notable periods, according to data provided by research firm S&P Capital IQ and reported by the media outlet. 

Information provided by the research firm reveals that the average length of the last six bull markets was 74 months, and the current one may have some ways to go, since it has been following an upward trend for 49 months, according to the news source. 

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