Among the more bullish voices on Wall Street is Joe Zidle, an investment strategist with The Blackstone Group. While other market watchers have been predicting severe plunges in stock prices, Zidle is sticking with his prediction that the S&P 500 Index (SPX) will surge past the 3,000 mark in 2018, CNBC reports. This would represent a 3.6% advance from the Sept. 13 open, and a gain of 12.2% for 2018.
Indeed, Zidle now believes that the magic number will be attained earlier than he previously expected, perhaps shortly after the midterm elections to Congress in November, rather than by year-end. Moreover, he foresees a positive trend in corporate earnings propelling stock prices yet higher. Jeff Saut, chief investment officer (CIO) at Raymond James Financial, uses market history to predict that the bull market is likely to last midway through the next decade. (For more, see also: This Bull Market May Trample Bears, Last Until 2025: Raymond James.)
S&P May Blast Through Blackstone's Target of 3,000
"What we have left for the rest of the year, I think, is going to be bullish with higher highs." -- Joseph Zidle, Blackstone Group investment strategist
'Strong Seasonal Tailwinds'
"The best equity performance actually comes after a midterm election," Zidle told CNBC, regarding his accelerated forecast for stock price gains in 2018. Ari Wald, head of technical analysis at Oppenheimer & Co., draws similar bullish lessons from history. "We think it's time to start looking for strong seasonal tailwinds," he wrote recently, as quoted by Barron's. Specifically, he continued, "Q4 of midterm years through Q2 of pre-election years have been the best nine-month stretch of the four-year U.S. presidential cycle since 1929."
On average, Wald finds that these three quarters have seen the S&P 500 rise by 6.7%, 5.2% and 4.5%, respectively. Meanwhile, research by UBS Group finds that the S&P 500 has posted an average gain of 14.5% from the end of August through the end of March, when a midterm election falls in between, Barron's adds.
'Growth, Not Elections'
Taking his own look at market history during midterm election years, Binky Chadha, chief global strategist at Deutsche Bank, concludes that "it was growth and not the midterm elections per se that was the key driver of the rallies," as quoted in another Barron's story. In the last 21 midterm election years, he computed a median gain of 8%, and only one loss, for the S&P 500 for the period starting one month before an election and ending two months afterwards. However, he found a 76% correlation between the actual gain in a given midterm year and the Institute For Supply Management (ISM) activity index during the six-month period around Election Day.
Midterm elections typically see a loss of seats in Congress by the president's party. Keith Parker, head of U.S. equity strategy at UBS Group, believes that the elections "could act as a check on market/economy-unfriendly rhetoric and actions by the Trump administration, particularly as it gets closer to the elections," as quoted by Barron's. Niladri Mukherjee, a director of portfolio strategy at Bank of America Merrill Lynch, is among those who note that the loss of Republican control in one or both houses of Congress may place a check on Trump's restrictive trade policies, per Barron's. However, Mukherjee adds that this also would threaten pro-growth Trump initiatives such as making individual tax cuts permanent, creating new incentives for retirement savings, and spurring research & development (R&D) spending.