Would You Expect a 30% Rally Over the Next 12 Months?

According to Birinyi Associates' most recent bottoms up analysis on the S&P 500, a consensus of analysts covering those stocks expect the market to rally over 31% within the next year.  (This is calculated as if every stock were to reach its respective price target within the specified time - usually 1y or 6mo.)  Anyone who has been watching stocks over the last 6 months probably knows, not thinks... knows, that Google for example will not rally to 620 within the next year.  To see a complete list of the expected impact of each sector, group and stock on the overall market try subscribing to Birinyi's Mini-Institutional service.

Analysts are historically bullish on their stocks.  US Steel for example is trading at an estimated P/E of 2.7.  The stock is down 53% year-to-date, the people trading that stock obviously do not agree with the analysts.  Earnings season begins tomorrow.  We would not be surprised to see a string of estimate revisions and downgrades as these companies come closer to reporting.  With that in mind, market bottoms are sometimes associated with extreme negative sentiment

Comments

[David Kaplan]

I would expect to see the market nly go down for a long while...

Make your own sense out of it. The uptick rule needs to be reinstated.

http://obscurefact.blogspot.com/2008/10/financial-crisis-explained-in-concise.html

[John Sweda]

It would be nice if the S&P 500 could hold 950. The VIX price today is listed at around 58, a new record high. This infers that the S&P could roughly move 17% up or down, over the next 30 days, which takes us up to the election. A 17% downward movement from here would mean 800 on the S&P.

[Simit Patel]

S&P is going to 800 at a minimum, when it will get there I don't know, but the bear trend is still intact. In the 01/02 recession S&P was at 800, and from a long-term technical analysis perspective, I think that is a key price point the market will be moving towards.