Bullish thesis still intact
Chief Investment Officer of Equities Steve Auth outlines the reasons why he's sticking to his call of 3,100 on the S&P by year-end and 3,400 or higher in 2019.
I'm Steve Auth, Chief Investment Officer of Equities at Federated Investors.
What are the potential threats to your call of 3,100 on the S&P by year-end and a further move to 3.400 or higher in 2019?
I think between here and year-end, we're probably three, there's a few real threats but one would be earnings and the economy. You know if the numbers start coming in softer, I think that would be a threat. We got the earnings seasons right upon us, we think it's gonna be pretty good. The second is trade, something bad goes there, you know, maybe with China if that gets worse, and the third could be the election. I mean I think if we get, a blue wave, as they say, people may become nervous about a policy change in 2020 that's been very positive for the market, so I think that can cause some nervousness in the market. - [Woman] What factors continue to support your bullish thesis? - As I say, you know things just have to get less worse on actually the three fronts I just mentioned. I think expectations have already been lowered going into the third quarter earning season. Our guess is, we're gonna have another pretty decent quarter up 15-20%. I think expectations for next year are being lowered I guess guidance will probably come up a bit. So I think, yeah, earnings should be pretty good. The second is on the trade side. I feel like we've already passed the peak of the angst there. And you know, maybe we get something with Europe next or possibly Japan. And people will see positive development there, maybe connecting the dots and say, China can't be too far behind. And on the election my guess is looking at it district by district, I think the election's gonna be close enough that you're not gonna get a big wave one way or the other that might be disorienting to markets, and I think we'll get that behind us, and have a little more certainty. I mean net net, we see earnings in 2019, closing in on 185 say, and a kind of reasonable multiple of that you can get to 3,400 pretty easily. And importantly as those that have been reading my pieces, we really think the cycle is likely to extend beyond next year, and as people start to see that, they'll be more willing to bid up equities into next year.
Views as of 10-10-2018 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Federated Global Investment Management Corp. 18-76281 (10/18)