Wall Street Was Wrong in 2012. What Are They Thinking For 2013?
If in 2012, Wall Street was bearish and dead-wrong, and is in 2013 bullish, what can we expect of the markets? The mainstream pundits have been celebrating the fact that Wall Street got it wrong in 2012, while exclaiming that the “markets” saved the world as if artificial easing of economies resembles in any way a “market.” So, let’s take a look first at what some Wall Streeters foresaw in 2011 for 2012. Then, we will see what some of the same companies forsee in 2013.
John Paulson called in 2012 for a collapse of Europe and Morgan Stanley warned that US stocks would decline. Paulson, who manages $19 billion, said the euro would disintegrate and bet against the region’s debt. In the long-term, he probably will be right, but since the banking fall of 2008 a slow motion collapse has defined the pace of western civ., Wall Street seemed to be off. Or, they purposely mislead the markets generally so as to ensure their ideal outcomes. The latter is more telling of how markets are truly ran behind the front lines of algo robots. Really, a slight quickening in the procession of before the acknowledgement that there were any true issues with the underlying global monetary structure, and corruption at all levels, is what the world has seen. So, in 2012, the USD was stable, precious metals were depressed, and stocks were well-above their crisis levels, approaching pre-crisis levels overall. Even housing nattering began to hint that that market was on a rebound, more than fifty percent off its high in many parts across the US and Europe.
Morgan Stanley predicted S&P 500 would lose 7 percent and Credit Suisse predicted volatile equity prices. These institutions were wrong in these respects last year. The participation of governments in markets takes time to take their toll. While a slew of regulations are aching the economy, the government has had a band-aid for each, and that is the period we find ourselves: just after the band-aid has been applied and right before it is compromised and begins to peel away.
The world’s largest banks and most successful investors gave the world ill-timed advice. Central bank stimulus by the Federal Reserve and the European Central Bank has enabled the global economy to maintain a velocity relatively similar to how it was before, but on a scale of similarities and differences, the way things are certainly are moving towards the unfamiliar, albeit the process creeps along as oppose to gallops. Behind the easing, Europe saw a 16 percent gain in the S&P 500 including dividens, leading to a 23 percent drop in the Chicago Board Options Exchange Volatility Index, paying investors in Greek debt 78 percent and gave Treasuries a 2.2 percent return despite that Warren Buffett called bonds “dangerous.”
- The market value of global equities increased by $6.5 trillion last year
- The All-Country World Index reteurned 17 percent including dividends
- The Bank of Amera Merrill Lynch Broad Market Sovereign Plus Index of Government debt returned 4.5 percent
Morgan Stanley acknowledges they sucked in 2012. In 2013, they are quite conservative. Their call for the stock market puts it within 25 points of its current price point. “Our year-end 2013 S&P500 price target is 1434, and our bull and bear targets are 1733 and 1135 . Our EPS outlook for 2014 is $110.21, up from our 2013 forecast of $98.71, both well below consensus.”
Credit Suisse has been pretty quiet on their 2013 outlook.
In 2012, Lloyd Blankfein said that one of the biggest risks was being too pessimistic. In 2013, Goldman Sachs is more than neutral. Goldman Sachs is instead looking at growth.
GS analysts said:
“The latest reading of our Global Leading Indicator shows continued expansion and the deal on the fiscal cliff should mean no imminent danger of recession in the U.S. On balance, this supports continued outperformance of financials and cyclicals into the new year.”