Random Thoughts

WT Wealth Management sees a slightly higher 12-month target for the S&P 500 — raising our estimates to 3100 from 3000, implying a sub-6.5% price appreciation in the coming year.

Factors influencing this modest projection include an expected slowdown in U.S. real GDP growth to 2.7% (Q4 2019 over Q4 2018) from the 3.2% anticipated for this year, as comparisons become tougher.

Challenging comps are also causing S&P 500 EPS growth expectations to be halved in 2019 to 10% from more than 20% in 2018. Additional headwinds should include a y/y rise in real CPI to 2.5%, along with at least four more 25 basis-point hikes to the Fed funds rate.

Finally, with the likelihood that the Democrats will regain control of the House, we expect elevated volatility from the unproductive tug-of-war traditionally associated with a gridlocked congress.

We remain resolute on the direction of equity prices in the year ahead but think an adjustment to the trajectory is warranted.