The S&P 500 has been marching steadily upward since February 2016 when fright shook Wall Street, and now it looks poised to reach 2,300 in a matter of months. But some believe wider swings in the index are possible this year, and now there’s debate about whether the S&P 500 will be exhausted soon or if there is more room to run.

S&P 500 to reach 2,350

In a research note dated Jan. 20, Credit Suisse analyst Andrew Garthwaite and team set forth a number of potential surprises that could happen this year, although if they do, it would be a surprise. One of their suggested surprises for the year is if the S&P 500 hits 2,500 before plunging to 2,000. The Credit Suisse team currently expects the index to hit 2,350 by the middle of the year before tipping back a bit to 2,300 by the end of the year.

One sign that the S&P 500 will swing much more widely this year is if an equity bubble occurs in the first half. Then there’s a risk for major events in the second half of the year to trigger a “much sharper sell-off,” Garthwaite and team warn.

No excess yet in S&P 500

However, they argue against such high volatility in the index this year, noting that usually equity bull markets go out with a bang in “some form of excess.” However, they don’t believe there have been many signs of excess within U.S. equities. They explained that excess can be observed in valuations, equity inflows, leverage or price performance deviations, but they have seen none of these indications.

They add that around the globe, equity bull markets usually end with equity indices about 100% higher than their 10-year moving average, but they currently stand at about 50% higher. They usually end with a 12-month trailing PE of about 23 times, which is higher than the current multiple of 19.

The Credit Suisse team adds that the U.S. equity  market has peaked at about 80% higher than its 10-year moving average, although they admit that the trailing valuation is similar to where it has been observed in past peaks in the U.S.

Looking further out, Stifel analysts predict that the S&P 500 will reach 2,800 by 2026.

Other suggested surprises

Beyond the S&P 500, the Credit Suisse team looks for the euro to fall to 1.03 on a three-month view and 1.00 on a 12-month basis, while a surprise would be if EUR/USD reaches 0.9 and then rises to end this year at 1.20. On China, their core view is 6.8% GDP growth this year and a weakening RMB that falls to 7.33 a the end of the year. Their suggested surprise is whether China’s GDP growth decelerates to 5% with the RMB falling to 8.

The Credit Suisse team sees oil prices rising to only $62 a barrel by the end of the year, but they said it could surprise by rising much higher—all the way to $75 per barrel. Their mid-year target for the Nikkei is 20,500, but a surprise might be 25,000.

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