Industry Analysts Project 13% Price Increase for S&P 500 Over the Next Year

During the second quarter, the S&P 500 index recorded an increase in value of 2.9%. Ahead of the start of second quarter earnings season, 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 13.0% increase in price 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 yesterday (July 5). 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 of the companies in the index. On July 5, the bottom-up target price for the S&P 500 was 3093.12, which was 13.0% above the closing price of 2736.61.

Sector-Level Breakdown

At the sector level, the Financials (+18.8%), Materials (17.4%), and Industrials (+17.1%) sectors are expected to see the largest price increases, as these sectors had the largest upside differences between the bottom-up target price and the closing price on July 5. On the other hand, the Utilities (+2.1%) and Real Estate (3.9%) sectors are expected to see the smallest price increases, as these sectors had the smallest upside differences between the bottom-up target price and the closing price on July 5.

Company-Level Breakdown

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 5) are listed 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, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been -0.3%. In other words, industry analysts have underestimated the price of the index 12 months in advance by 0.3% on average during the previous five years (using month-end values). Over the past 10 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 10.9%. Over the past 15 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 9.7%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 10.9% on average over the past 10 years (using month-end values) and by 9.7% on average over the past 15 years (using month-end values).