Deutsche Bank Just Got MORE Bullish On Stocks, Says All Of The Crazy Autumn Risks Will Prove Benign
Morgan Stanley's Adam Parker just told clients he expected the S&P 500 to surge 12% to 1,840 within twelve months.
Separately, Deutsche Bank's David Bianco cranked up his year-end target to 1,750 from 1,675.
From his note:
Since early May, we advocated using the summer to watch for signs of a return to healthy S&P EPS growth, 5%+ y/y, after four shy quarters. We argued that the keys to healthy EPS growth are oil price resilience and better manufacturing activity, investment spending and exports. Oil prices and the euro have been very resilient, despite higher yields and dollar gains. Moreover, macro reports for July and August indicate an at least moderate acceleration in capex and trade from 1H. Hence, we raise 2014E EPS and our 2013 yearend target to 1750 from 1675. We now think the S&P's Next 5%+ price move is Up.
Bianco expects S&P 500 EPS to climb 7% to $119 in 2014, up from an earlier forecast of $115. This would be on 4.5% sales growth.
But what about all of the September risks that everyone's been screaming about?
Bianco thinks that's already old news for the stock market.
This autumn presents investors with three risks that have been well known and contemplated all year if not longer. In a broad sense, the market has faced these risks many times in the past and just the particulars differ given time and place. But a shared characteristic of today's specific risks with similar ones in the past, when such risks failed to topple the market, is that these risks have now been assigned calendar dates. Risks by appointment usually fail to show on time or produce the harm feared and rather tend to serve as rally catalysts.
The three risks feared this autumn, which we expect to prove benign and serve as catalysts to another up leg in a secular bull market fed by still undemanding valuations and a return to healthy EPS growth are: 1) Fed Tapering, 2) the US debt ceiling, also with relation to Obamacare funding and implementation, and 3) Syria. In general, these are risks of monetary, fiscal and foreign policy. None of which we think has the potential to turn the economic cycle or threaten S&P 500 EPS growth or further multiyear PE expansion back to normal levels.
The S&P 500 is trading at near 1,650 right now.