Wall Street Grows Cautious but Still Optimistic: Reuters Poll

Fears of a prolonged U.S.-China trade war and a potentially overzealous Federal Reserve have left Wall Street strategists less optimistic about stock market gains next year, but they still expect a decent increase, a Reuters poll found. The benchmark S&P 500 <.SPX> will finish 2019 at 2,975, up around 11 percent from Tuesday's close of 2,682.17, based on the median forecast of 46 strategists polled by Reuters in the last two weeks. It will end 2018 at 2,800, which would be a near 5 percent gain over last year, according to the poll median. But the 2019 forecast marks a drop from three months ago, when strategists polled by Reuters predicted the index would reach 3,100 by the end of 2019.Uncertainty over the outcome of the U.S.-China trade battle - and how long it will go on - has many strategists worried, with some saying any resolution to the conflict should result in a relief rally. "We're reducing our targets as much due to risk as anything else," said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management in New York. "The longer this trade skirmish lasts, the more potential it has to turn into a trade war." BNY Mellon's end-2019 S&P 500 forecast is 3,000 versus 3,100 in Reuters' last poll. But most strategists polled were confident the decade-old bull market will go on for at least another year. While many said the pace of U.S. profit growth is likely to slow, they said earnings and the economy will still be supportive for stocks. “The earnings growth rate has peaked, but the absolute level of earnings should continue to increase over the coming year as solid sales growth should continue to drive earnings at a lower, more sustainable.