BULL – June 1: Deutsche Bank US equity analyst Binky Chadha forecasts S&P 500 at 1060 by 2009 year-end, citing improving corporate profit margins.  He said aggregate profit margins for S&P 500 “remains well below the average of the last few years, implying considerable potential upside over the medium term.”

BULL – June 1: JP Morgan Chase analyst Thomas Lee forecasts 2009 year-end S&P 500 index at 1100.

BULL – June 1: Bank of America/Merrill Lynch analyst David Bianco forecasts 2009 year-end S&P 500 index at 1100.

BEAR – May 30: Morgan Stanley equity analyst Jason Todd says sell this S&P 500 rally. He says Morgan Stanley does not see large upside above 825-850.  He said,  “In the rush to buy a cyclical recovery, it seems earnings or valuation no longer matters. We would be comfortable with this view if the earnings trough was closer, but it is not.”

BEAR – MAY 28: Berkshire Hathaway possible successor to Warren Buffet, David Sokol, says they see no evidence of the green shoots that been a stimulus to the stock market.  He sees the most significant headwinds to the electric utility industry in his 30 years, and see continuing housing industry problems.

BEAR?/BULL? – May 28: PIMCO co-CEO Bill Gross (manager of world’s largest bond fund) portrays “new normal” including  accelerating inflation toward the latter part of a three- to five-year cycle, and the need to reexamine accepted notions about investing.  He said stocks have not and will not always outperform bonds, and having 60% to 80% of portfolio assets in stocks may not always make sense.  He believes the dollar will lose its status as the reserve currency; Brazil, India and China (forget Russia) will offer the best growth. The U.S. government will be selling trillions in Treasuries; the US savings rate may rise significantly, and the consumer economy may be shrinking long term due to the aging of the population.

BULL?/BEAR? – May 28: GMO CEO Jeremy Grantham predicts higher US savings and lower consumption with many postponed retirements.  He sees some reasonable values within the stock market now and sees the third year of the presidential cycle (2011) as the most promising.  He is not certain that a robust rally will continune.  Like John Bogle, he believes in the principle of having your age as the percentage of bonds in your portfolio.  He expects a bubble in emerging market stocks to develop.

BEAR – MAY 26: Comstock Partners portfolio managers Charlie Minter and Marty Weiner, say P/E’s on “as reported earnings” are too high in consideration of the long-term trend in earnings (now in down phase).  “Over the past 75 years, most market peaks topped at around 20 times reported earnings, and the troughs occurred at around 10 times earnings. The financial mania of the late 1990s pushed P/Es to over 40 times reported earnings, and the following bust never brought P/Es below 18 times reported earnings. … Going back to 1950, every instance where actual earnings rose above trend-line earnings was followed by a period where actual earnings went well below trend-line earnings. Comstock Partners believes that we have entered such a period now, and that the market is trading at such a high multiple of trend-line earnings that it will be difficult to make money.”

BEAR – May 19: Gluskin Sheff analyst David Rosenberg (formerly of Merill Lynch) says this rally is a sucker’s rally based on short covering.  “The FTSE All-World market P/E ratio on forward earnings estimates is now around 15x, well above pre-Lehman collapse levels and nearly double the lows for the cycle …  this was a rally built largely on short covering, pension fund rebalancing and the emergence of hope wrapped up in ‘green shoot’ data points. … On average, the S&P 500 undergoes a correction of more than 20% … at a minimum, take profits”

NEUTRAL (BEAR?) – May 11: Baring Asset Management portfolio manager Hayes Miller says “Estimates suggest there isn’t that much further to run because equities are fairly valued … Earnings growth for 2009 and 2010 can’t support prices too much higher than where we are today.”

BEAR – May 11: HSBC Global Asset Management chief investment officer Leon Goldfeld, chief investment officer at HSBC Global Asset Management said it’s “hard to see” enough profit growth to justify higher stock prices. The firm’s strategy will be to reduce its holdings of equities and move into bonds and cash, he said.Bloomberg TV on June 1, said HSBC forecasts 900 as the year-end price for the S&P 500 index.

NEUTRAL – May 11: Bloomberg compilation of analyst forecasts of 2009 earnings for the S&P 500 is at $57.17 (not stated whether “as reported” or “operating”).  As of June 1, that puts the S&P at about 16.5 times forecasted earnings.  Yale economist Robert Schiller said the historic average is a multiple of about 16.3. [we note that we are not in an average situation or stage of a market, however].

BEAR – May 11: Bank of America CIO for private wealth management expects a 10% correction.  He said, “We’re going to be in a very volatile, chop-and-grind type of market. We’ve been shown that there is a small light at the end of the tunnel, it’s dim but getting brighter, and that’s why stock prices have come this far this fast.  Now, it’s all about ‘show me.’”

BEAR?/ BULL? – May Letter: PIMCO co-CEO Bill Gross wrote: “Do not be deceived by the euphoric sightings of “green shoots” and the claims for new bull markets in a multitude of asset classes. Stable and secure income is still the order of the day. Shaking hands with the new government is still the prescribed strategy, although it should be done at a senior level of the balance sheet. If the government indeed becomes your investment partner,  you should keep the big Uncle in clear sight and without back turned. Risk will not likely be rewarded until the global economy stabilizes and the Obama rules of order are more clearly defined.”

BEAR – April 17: Barclay’s analyst Barry Knapp forecasts S&P 500 at 757 by year-end 2009. He said, “The equity market has priced this recovery and then some.   It looks pretty expensive to us.”

Related Charts:

These two charts (one short-term and one very long-term) place horizontal lines at the levels of the analyst forecasts listed in this article superimposed on the 2-year and 20-year daily prices for the S&P 500 (proxies SPY and IVV).

click image to enlarge

Richard Shaw
QVM Group LLC

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