Here’s Where Strategists See the S&P 500 With and Without a Tax CutBy
Speculation Donald Trump’s tax cut will pass has been rising along with equity prices. A question remains: how much is priced into the market? A look at projections from Wall Street strategists may offer hints.
Among a dozen strategists tracked by Bloomberg, five have cited lower taxes as one reason why they’re bullish on stocks next year. Others, while excluding the tax impact from their forecasts for now, consider it a potential catalyst.
The table below presents estimates from strategists for where the S&P 500 will finish 2018 and how much profit companies will generate - with and without the bill’s passage.
|Firm||Strategist||Index Level||EPS||Index with Tax Impact||EPS Boost|
|BofA||Savita Subramanian(a)||2,800||$139||Up to $19|
|Citi||Tobias Levkovich (b)||2,675||$141||2,800||$8|
|Deutsche Bank||Binky Chadha||2,850||$146||3,000||12%|
|Evercore ISI||Dennis DeBusschere||3,000||$146||Same||Same|
|Morgan Stanley||Mike Wilson (c)||2,750||$145||Same||Same|
|UBS||Keith Parker (d)||2,900||$141||3,300||7-9%|
a. Subramanian expects a large portion of the benefit to be passed through to customers
b. Levkovich’s 2,675 forecast based on 25% tax rate versus 21% proposed by Republicans
c. Wilson’s S&P 500 target based on 2019 EPS estimate of $150
d. Parker sees the tax effect on EPS materializing in 2019, yet market may start pricing it in next year