During the first quarter, the S&P 500 index recorded a decrease in value (-1.2%) for the first time since Q3 2015. During the past 12 months (March 31, 2017 to March 31), the S&P 500 recorded an increase in value of 11.8%. 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 16.2% 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 April 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 the companies in the index. On April 5, the bottom-up target price for the S&P 500 was 3,094.05, which was 16.2% above the closing price of 2,662.84.
At the sector level, the Health Care (+18.8%), Information Technology (+18.2%), and Energy (+18.0%) 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 April 5. On the other hand, the Utilities (+4.8%) 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 April 5.
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 -0.2%. In other words, industry analysts have underestimated the price of the index 12 months in advance by 0.2% 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 11.6%. 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 10.5%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 11.6% on average over the past 10 years (using month-end values) and by 10.5% on average over the past 15 years (using month-end values).