Despite Tapering, US Stock Market Expected to Rise... Wells Fargo Predicts 8% Increase by Year-End

S&P 500 Index Forecast Raised to 4825 This Year "Corporate Earnings Continue to Grow"
If Forecast Holds, S&P 500 Gains 28.5% This Year, Highest Since 1997

S&P500 Index Trend This Year [Image Source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Although the U.S. central bank, the Federal Reserve (Fed), is expected to begin tapering (reducing asset purchases) within this year, Wall Street banks are anticipating further stock price increases and have raised their S&P 500 index forecasts.

According to major foreign media on the 24th (local time), U.S. bank Wells Fargo significantly raised its S&P 500 index forecast for this year from the previous 3800 to 4825 in a report released that day. As of that date, the S&P 500 index had already risen 19.4% this year, but Wells Fargo expects it could rise about 8% more by the end of the year.

According to Wells Fargo’s analysis, there have been eight instances in the past 31 years when the S&P 500 index recorded double-digit gains from January to August. Furthermore, in those eight years with double-digit gains through August, the average increase during the last four months was 8.4%, so Wells Fargo analyzed that there is room for about an 8% further rise this year as well.

Wells Fargo explained that the expectation of continued growth in corporate earnings supports this technical upward forecast.

Wells Fargo expects the annual earnings per share (EPS) of S&P 500 companies to reach $211 this year and to increase by 12% to $238 next year. Analyst Christopher Harvey stated, "The EPS estimates for S&P 500 companies have been revised upward by 21% so far, and there is no sign that this trend will break."

In fact, U.S. corporate earnings are increasing significantly more than expected. According to financial information provider Refinitiv, 87% of S&P 500 companies reported earnings that exceeded Wall Street expectations in the second quarter of this year. This 87% is the highest ratio ever recorded.

FactSet Research’s aggregation also shows that Wall Street analysts expect the annual EPS of S&P 500 companies to be $199 this year and to rise to $217 next year. Although Wells Fargo’s earnings forecast is somewhat higher, Wall Street generally agrees that U.S. corporate earnings will continue to grow next year.

If the S&P 500 index reaches 4825 by the end of the year as Wells Fargo expects, the index’s annual gain will be 28.5%, marking the highest increase since 1997, when it rose 31%.

Swiss investment bank UBS also raised its S&P 500 index forecast for this year from 4500 to 4600 in a report on the 22nd and predicted that the S&P 500 index will reach 5000 by the end of next year.

This content was produced with the assistance of AI translation services.