Industry Analysts Predict a 15% Price Increase for the S&P 500 Over the Next 12 Months

The price of the S&P 500 increased by 14.4% during the first two quarters of the year (to 4297.50 from 3756.07), but only increased by 0.2% during the third quarter (to 4307.54 from 4297.50). 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 14.8% 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 October 6. 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 the companies in the index. On October 6, the bottom-up target price for the S&P 500 was 5051.70, which was 14.8% above the closing price of 4399.76.

At the sector level, the Communication Services (+18.0%) sector is expected to see the largest price increase, as this sector had the largest upside difference between the bottom-up target price and the closing price on October 6. On the other hand, the Financials (+7.8%) 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 October 6.

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 October 6) 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 1.7% on average (using month-end values). Over the past 10 years, industry analysts have overestimated the price of the index by 0.8% on average (using month-end values). Over the past 15 years, industry analysts have overestimated the price of the index by 8.1% on average (using month-end values). Over the past 20 years, industry analysts have overestimated the price of the index by 9.6% on average (using month-end values).

It is interesting to note that on September 30, 2020, the bottom-up target price was 3775.94. One year later (on September 30, 2021), the S&P 500 closing price was 4307.54. Thus, industry analysts underestimated the closing price at the end of September 2021 by 12% one year ago.

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