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Opinion
Jonathan Levin

Flaws Emerge in Strategists’ Bullish Case for Stocks

Earnings are supposed to buoy the market through the end of the year. That could be a miscalculation. 

The consensus on the S&P 500 is often wrong when the outlook gets messy.

The consensus on the S&P 500 is often wrong when the outlook gets messy.

Photographer: Timothy A. Clary/AFP/Getty Images

Wall Street equity strategists think resilient earnings will keep stocks buoyant through the end of the year even as the Federal Reserve lifts interest rates. If they’re right, the S&P 500 Index looks like a bargain, but serious cracks are emerging in their earnings thesis.

A Bloomberg survey published this week showed the average strategist projects the index will end the year at 4,743, an implied upside of 21% from Wednesday’s close after the index fell more than 4% on the day. As the thinking goes, earnings have held up so far, and strategists still project that they’ll post about 10% growth on the year, even though the index has fallen about 18% year to date — an alluring proposition for investors sitting on cash and wondering when to wade back in.