David Bianco, Bank of America Merrill Lynch Global Research chief U.S. equity strategist, appeared on CNBC Wednesday morning and said he expected S&P earnings to be $93.00 for 2011, with interest rates on the 10-year staying below 4%. Bloomberg reported the outlooks for Bianco along with a number of other equity strategists. The table below shows the original analysts’ predictions along with the predicted value using the RPF Model (read about the model here) and assuming a 30-year Treasury yield of 4.5%.
|
| Predicted | ||
Firm | Strategist | 2011 Close | 2011 EPS | RPF Model |
Bank of America | David Bianco | 1,400 | $93.00 | 1,535 |
Bank of Montreal | Ben Joyce | 1,300 | $89.00 | 1,469 |
Barclays | Barry Knapp | 1,420 | $91.00 | 1,502 |
Citigroup* | Tobias Levkovich | 1,300 | $94.50 | 1,559 |
Credit Suisse | Andrew Garthwaite | 1,350 | $91.00 | 1,502 |
Deutsche Bank | Binky Chadha | 1,550 | $96.00 | 1,584 |
Goldman Sachs | David Kostin | 1,450 | $94.00 | 1,551 |
HSBC | Garry Evans | 1,320 |
|
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JPMorgan | Thomas Lee | 1,425 | $94.00 | 1,551 |
Morgan Stanley** |
|
|
|
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Oppenheimer | Brian Belski | 1,325 | $88.50 | 1,460 |
RBC | Myles Zyblock |
| $88.00 | 1,452 |
UBS | Jonathan Golub | 1,325 | $93.00 | 1,535 |
Median | 1,350 | $93.00 | 1,535 | |
Average | 1,379 | $92.00 | 1,518 | |
High | 1,550 | $96.00 | 1,584 | |
Low | 1,300 | $88.00 | 1,452 | |
Source: Bloomberg, Hassett Advisors Analysis
Interestingly Bianco’s assessment of 1,500 is consistent with the RPF Model projection of 1,530. In the interview Bianco says that 1,400 is based on an 80% chance of 1,500 and a 20% chance of 1,000. The 1,000 level would imply that the assumption for earnings is high and we hit a double dip recession or interest rates spike.
The bottom line is that if you have confidence in the U.S. economy as reflected in corporate earnings and that long-term interest rates will remain low, there appears to be considerable upside to the S&P 500 Index.
Disclosure: I am long SPY.
Additional disclosure: Also short Treasuries.
