Markets Report: Strategists not hung up on trade war fall
The US benchmark S&P 500 index will finish 2019 at 2,925, up about 4.4pc from yesterday's close, based on the median forecast of 50 strategists polled by Reuters in the last two weeks. It would represent a gain of 16.7pc from the end of 2018.
Most strategists in the poll cited further escalation in the US-China trade war as the biggest potential negative over the coming year, followed by a worse-than-expected US economic slowdown and slower earnings growth.
Rising intensity in the trade war is likely the biggest risk since it could affect so many other areas, said Sam Stovall at CFRA.
"It could have a cascading effect on the global economy and corporate profit growth, which could cause shares to become overvalued," Stovall said.
The overwhelming majority of strategists in the US poll also said the risk for stocks is skewed more toward the downside.
Although the S&P 500 remains up about 12pc for the year so far, stocks have sold off recently amid persistent worries over the trade battle. The Dow Jones industrial average last week registered its fifth straight week of declines, its longest such losing streak in eight years. Adding to tensions, Washington effectively banned US firms from doing business with Huawei, the world's largest telecoms network gear maker, citing national security concerns.
"Companies are getting more worried about the sanctions in the ramp up in this trade war than they are about tariffs," said Anthony Saglimbene, global market strategist at Ameriprise Financial, noting technology companies could be hit the hardest.
Still, strategists were slightly more optimistic about the S&P 500's potential gains in 2019 than they were in a Reuters poll in February, when the median target for the index was 2,900.
Many investors remain hopeful of an eventual trade agreement, and some expect the market to weather the turbulence well.
"It's kind of the risk du jour. Ultimately, the likelihood it actually hurts the economy enough to drive stock prices meaningfully lower is limited. The market right now is still quite healthy," said Jonathan Golub, of Credit Suisse in New York.