Wall Street strategists stick by their bullish 2020 market forecasts despite coronavirus fears

  • Despite the growing coronavirus fears, major banks including Morgan Stanley, JPMorgan, UBS and Credit Suisse are sticking with their bullish year-end target on the S&P 500.
  • “The fundamental backdrop is supportive, in our view, and the fallout from the outbreak is unlikely to hurt activity prints over the medium term,” said Mislav Matejka, JPMorgan’s head of global and European equity strategy.
  • Mike Wilson, Morgan Stanley’s head of U.S. equity strategy, said the current correction will be contained to 5% in the S&P 500.

The U.S. stock market erased all of its 2020 advance amid growing concerns the fast-spreading coronavirus will lead to a global economic fallout, but a slew of Wall Street strategists believe the fears might be overblown.

Analysts from major financial institutions including Morgan Stanley, JPMorgan, UBS and Credit Suisse are all sticking with their bullish year-end targets on the S&P 500, seeing the Chinese virus as a short-term risk rather than a threat to derail the record-long bull market.

“The fundamental backdrop is supportive, in our view, and the fallout from the outbreak is unlikely to hurt [economic] activity prints over the medium term,” Mislav Matejka, JPMorgan’s head of global and European equity strategy, said in a note on Monday. “Our call remains that one should not expect a US recession ahead of presidential elections.”

Stocks suffered a brutal sell-off Friday, with the S&P 500 and the Dow Jones Industrial Average both turning red for 2020, as the confirmed coronavirus cases rose to at least 10,000 with more than 300 deaths confirmed. Fears were fueled after major U.S. airlines decided to suspend their service to China.

But clients were taking the advice of the strategists on Monday, bidding shares up with the Dow making back more than half of Friday’s rout.

The market strategists believe the current pullback will be short-lived and are betting on an earnings rebound this year. Strong economic fundamentals and an accommodative Federal Reserve will also help offset the global health risk, they believe.

“The virus development should not derail the recovery,” Mike Wilson, Morgan Stanley’s head of U.S. equity strategy, said in a note on Monday. “We continue to think this correction will be contained to 5% in the S&P 500…There is strong support at 3100 on the S&P 500 both technically and from a valuation standpoint.”

Wall Street has an average year-end target of 3,356 on the S&P 500, which represents a 4% gain from Friday’s close of 3,225.52, according to CNBC market strategist survey.

“We still believe that the stock indices will make further all-time highs before the next US recession strikes,” JPMorgan’s Matejka said. The bank sees the S&P 500 climbing to 3,400 in 2020.

Source: https://www.cnbc.com/2020/02/03/strategists-stick-with-their-bullish-2020-target-despite-coronavirus.html

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