Industry Analysts Predict the S&P 500 Will Close Above 3400 in CY 2020(Dec 18, 2019)

박재훈투영인

created At: 2/20/2025

Sell

This analysis includes a sell recommendation. Please carefully review all mentioned risk before proceeding.

Fact

he S&P 500 rose 26.4% in 2019, reaching 3168.57. Analysts predict a 7.5% increase over the next 12 months, targeting 3407.46. Historically (2004–2018), analysts have overestimated the index by an average of 9.0% (or 3.1% excluding 2008’s outlier). Applying these averages to the 2020 target: With 9.0% overestimation: expected close at 3100.60. With 3.1% overestimation: expected close at 3302.46.

Opinion

Analysts' consistent overestimation highlights a bias toward optimism in long-term forecasts. The sharp 2008 deviation skews historical data, but even when excluded, a tendency to overproject remains. Current forecasts suggest modest growth, yet historical patterns indicate the index may close below targets. Investor caution, macroeconomic shifts, or unforeseen shocks could further temper outcomes.

Core Sell Point

Analysts expect moderate S&P 500 growth in 2020, but historical overestimations suggest the index may underperform current projections.

For 2019, the S&P 500 has witnessed an increase in value of 26.4% (to 3168.57 from 2506.85) to date. 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 7.5% increase in price over the next twelve months. This percentage is based on the difference between the bottom-up target price and the closing price for the index as of yesterday. 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 December 12, the bottom-up target price for the S&P 500 was 3407.46, which was 7.5% above the closing price of 3168.57.

How accurate have the industry analysts been in predicting the final value of the S&P 500?

Over the previous 15 years (2004 – 2018), the average difference between the bottom-up target price estimate at the beginning of the year (December 31) and the final price for the index for that same year has been 9.0%. In other words, industry analysts on average have overestimated the final price of the index by about 9.0% one year in advance during the previous 15 years. Analysts overestimated the final value (i.e. the final value finished below the estimate) in 12 of the 15 years and underestimated the final value (i.e. the final value finished above the estimate) in the other 3 years.

However, this 9.0% average includes one year (2008) in which there was a substantial difference between the bottom-up target price estimate at the start of the year and the closing price for the index for that same year (+92%). If the year 2008 were excluded, the average difference between the bottom-up target price estimate one year prior to the end of that year and the closing price of the index for that same year would be 3.1%.

If one applies the average overestimation of 9.0% to the current 2020 bottom-up target price estimate (assuming the estimate changes little between now and December 31), the expected closing value for 2020 would be 3100.60. If one applies the average overestimation of 3.1% (excluding 2008) to the current 2020 bottom-up target price estimate, the expected closing value for 2020 would be 3302.46.

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