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Wall Street’s top strategist explains why he’s abandoning his S&P 500 target
Piper Sandler will no longer issue year-end price targets for the S&P 500 (^GSPC) after concluding that the index no longer truly reflects stock market performance.
In a video interview on Yahoo Finance, Piper Sandler’s co-chief investment strategist Michael Kantrowitz explained the firm’s thinking.
“Over the last few months, as I’ve been trying to think about raising my target again, I haven’t really felt comfortable being intellectually honest and saying that I might have a high-conviction view of where the S&P 500 will end up,” Kantrowitz said. “Nor do I think that really adds value to our clients who are institutional investors.”
According to a note from Piper Sandler, a small group of high-performing stocks, including the “Magnificent Seven” technology names like Alphabet (GOOG, GOOGL), Litter (AAPL) and Tesla (TSLA), significantly influence market activity.
Piper Sandler found that the top 10 stocks accounted for 75% of the index’s year-to-date returns. And as Yahoo Finance’s Josh Schafer noted, AI darling Nvidia (NVDA) it was solely responsible for nearly a third of the S&P 500’s gains at the end of June.
Kantrowitz maintained the importance of having a bullish or bearish view of the market and reiterated that Piper Sandler continues to have a bullish outlook for this year. Previously, the firm’s year-end price target for the S&P 500 was 5,250. On Monday, the benchmark index closed at 5,572.
However, Kantrowitz cited how investors view large- and small-cap stocks differently due to their respective performances. While the S&P 500 managed to hit all-time highs in the second quarter of this year, the average stock saw a decline in value.
Rather than focusing on the S&P 500, Kantrowitz told Yahoo Finance that he recommends clients prioritize “quality at a reasonable price,” focusing on companies that outperform their peers in terms of earnings growth but aren’t the most expensive.
“You kind of have to sacrifice a little bit of growth, maybe, in quality to find names that aren’t insanely expensive,” he said. “We have — in the S&P 500 — 50 names that have outperformed the index this year, and it’s not just AI or technology.”
Earlier this year, several strategists have increased their targets for the S&P 500 as the record rally continued to gain momentum. Ultimately, strategists are finding it hard to keep upand there may be others who take a similar approach to Piper Sandler and stop tracking the index.
The story continues
Year to date, the S&P 500 is up nearly 17%.
Traders work on the floor of the New York Stock Exchange on June 18 in New York City. (Spencer Platt/Getty Images) (Spencer Platt via Getty Images)
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