Industry Analysts Still Predict the S&P 500 Price Will Close Above 5,000 in the Next 12 Months

The price of the S&P 500 has decreased by 5.2% since December 31. Where do industry analysts believe the price of the index will go from here?

The Bottom-Up Target Price Shows a 12-Month Increase of 16.8%

Industry analysts in aggregate predict the S&P 500 will see a price increase of 16.8% 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 March 24. 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 March 24, the bottom-up target price for the S&P 500 was 5278.60, which was 16.8% above the closing price of 4520.16.

Expected Price Increases by Sector

At the sector level, the Communication Services (+27.9%), Consumer Discretionary (+21.1%), and Information Technology (+19.9%) sectors are expected to see the largest price increases, as these three sectors had the largest upside differences between the bottom-up target price and the closing price on March 24. On the other hand, the Energy (+4.5%) and Utilities (+5.0%) sectors are expected to see the smallest price increases, as these two sectors had the smallest upside differences between the bottom-up target price and the closing price on March 24.

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 March 24) can be found in the tables below. It is interesting to note that six of the 10 stocks expected to see the largest price increases are in the Consumer Discretionary sector, while four of the 10 stocks expected to see the largest price decreases are in the Materials sector.

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 Industry Analysts Been in Predicting the Future Value of the S&P 500?

In recent periods, industry analysts have underestimated the closing price of the index 12 months later. Over the past five years, Industry analysts have underestimated the price of the index by 2.8% on average (using month-end values). Over the past 10 years, industry analysts have underestimated the price of the index by 0.1% on average (using month-end values).

On March 31, 2021, the bottom-up target price was 4477.71. Nearly one year later (on March 24, 2022), the S&P 500 closing price was 4520.16. Based on yesterday’s closing price, industry analysts underestimated the closing price at the end of March 2022 by about 1% nearly one year ago.

However, over longer time periods, analysts have typically overestimated the closing price 12 months later. Over the past 15 years, industry analysts have overestimated the price of the index by 7.7% on average (using month-end values).

It is interesting to note that after rising for 21 straight months (using month-end values), the bottom-up target price has declined over the past two months. Since January 31, the bottom-up target price has decreased by 0.8% (to 5278.75 from 5319.31). Despite the recent decrease, industry analysts still predict the index will close above 5,000 in 12 months.  

However, the movement in the index price and the movement in bottom-up target price have a high positive correlation. Thus, if there is a continuation in the decline in the price of the index, there will likely be a continuation in the decline in the bottom-up target price.

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