After Record Close, Industry Analysts Still Predict a Double-Digit Price Increase for the S&P 500

On July 7, the S&P 500 closed at a record-high value of 4358.13. On July 8, the value of the index fell about 1% to 4320.82. Where do industry analysts believe the price of the index will go from here?

Industry analysts in aggregate predict the S&P 500 will see a price increase of 11.2% over the next 12 months. This percentage is based on the difference between the bottom-up target price and the closing price for the index as of July 8. The bottom-up target price is calculated by aggregating the median target price estimates (based on company-level estimates submitted by industry analysts) for all  companies in the index. On July 8, the bottom-up target price for the S&P 500 was 4803.62, which was 11.2% above the closing price of 4320.82.

At the sector level, the Energy (+17.1%) and Materials (+15.9%) sectors are expected to see the largest price increases, as these two sectors had the largest upside differences between the bottom-up target price and the closing price on July 8. On the other hand, the Real Estate (+4.2%) sector is expected to see the smallest price increase, as this sector had the smallest upside difference between the bottom-up target price and the closing price on July 8.

At the company level, the 10 stocks in the S&P 500 with the largest upside and downside differences between their median target price and closing price (on July 8) can be found in the tables below.

S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)

S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)

How accurate have the industry analysts been in predicting the future value of the S&P 500? Over the past five years, Industry analysts have underestimated the price of the index by 0.5% on average (using month-end values). Over the past 10 years, industry analysts have overestimated the price of the index by 1.5% on average (using month-end values). Over the past 15 years, industry analysts have overestimated the price of the index by 9.1% on average (using month-end values). It is interesting to note that on June 30, 2020, the bottom-up target price was 3327.64. One year later (on June 30, 2021), the S&P 500 closing price was 4297.50. Thus, industry analysts underestimated the closing price at the end of June 2021 by nearly 23% one year ago.

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