Next year will be better for stock investors, according to JPMorgan Chase & Co., which is joining other Wall Street bulls in forecasting big gains for 2019.
The S&P 500 Index will rise about 17 percent from current levels to 3,100 by the end of next year, driven by profit growth and investors’ willingness to accept higher valuations, strategists led by Dubravko Lakos-Bujas and Marko Kolanovic wrote in a note to clients Friday. The prediction is slightly higher than the average estimate of 3,056 from 14 other strategists surveyed by Bloomberg.
Investors who have turned away from the stock market as the benchmark index heads to one of its worst performances in the nine-year bull market will be lured back as companies spend more than $1.5 trillion on dividends and share repurchases, JPMorgan wrote. Hedge funds in particular hold fewer stocks than normal, and just a return to average would mean $500 billion pouring into U.S. equities, according to the investment bank.
“We see the upside pain-trade driven by cyclical leadership, in particular growth sectors,” the strategists wrote in the note. “Even though earnings are expected to decelerate relative to 2018, they should remain positive and continue to grow.”
S&P 500 companies will earn a cumulative $178 a share next year, an 8 percent increase, the firm projected. That estimate assumed a greater probability of a U.S.-China trade deal than tariff escalation.