Raising our 2018 SPX estimates and target and initiating our 2019 outlook. We are raising our 2018 estimated S&P 500 Index (SPX) operating earnings per share (EPS) from $155/sh to $160/sh. We are maintaining our multiple assumption of 20x, which causes our 2018 SPX target to move from 3100 to 3200. We are also initiating our 2019 SPX target of 3360, using a 5% growth rate in operating EPS ($168), and the same valuation parameters.

Increased 1H/18 volatility sets stage for next leg higher. As the market was ramping in January, we suggested this might get interesting with increased volatility in the first half of 2018 because excessive optimism in both the markets and economic assumptions had become extreme. As a result, we thought the SPX gains would be second-half loaded, and we are nearing that part of the year, and that euphoria for both the economy and market have faded a bit. It is key to remember the fundamental backdrop of positive EPS should power the markets higher.

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