The S&P 500 closed at 1,920.03 by the end of the third quarter, which was 6.9% lower than its closing price of 2,063.11 during the start of the period. According to FactSet, the price decline was the largest for the index during a third quarter since the 11.4% decline in the third quarter of 2011.
The S&P 500 dropped in the third quarter due to investors concerns regarding a potential slowdown of the global economy. In August, China surprisingly devalued the yuan currency, which caused a global market rout. A number of economic data showed that the Chinese economy is weakening, which ignited concerns that it might spill over and affect the global economic growth.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
Despite the ongoing concerns regarding the global economic growth, industry analysts and market strategists predicted that the S&P 500 will increase by double-digit over the near term, according to FactSet.
S&P 500 price estimates
Industry analysts estimated that the bottom-up target price for the S&P 500 would be 2317.68 over the near term— 20.7% higher than its 1920.03 closing price in the third quarter. They based their estimate on the difference between the bottom-up target price and the closing price of the S&P 500 by the end of September.
On the other hand, market strategists forecasted that the S&P 500 will increase by 13.6% to 2180.50 over the near term. They calculated their estimate based on the difference between the top-down mean target price and the closing price for the index at the end of September.
FactSet noted that industry analysts and market strategist underestimated the forward 12-month value of the S&P 500 on average from October 2013 to September 2014. However, industry analysts were more accurate in their predictions during the period.
According to the financial research firm, the bottom-up price target estimate of the industry analysts was 0.2% below the closing value of the S&P 500 on average during the past year.
On the other hand, the top-down mean target price estimate of market strategists was 6.0% below the closing value of the S&P 500 on average during the past year.
FactSet also noted that both industry analysts and market strategist overestimated the actual value of the index on September 30, 2015, based on their price estimates from exactly one year ago (September 30, 2014).
Market strategists were more accurate in their predictions than industry analysts based on the target price estimates for the S&P 500 on this date. By the end of September 2014, industry analysts estimated that the bottom-up target price for the index was 2,179.01 while market strategists predicted a top-down mean target price of 2,056.50.
Industry analysts overestimated the price of the S&P 500 by 13.5% while market strategists overestimated by 7.1% by the end of the third quarter.
S&P 500 companies Buy rating rose 5.9%
FactSet noted that the ratings on S&P 500 became positive by the end of the third quarter. Out of the 11,295 ratings on the companies listed in the index, 51.8% were given Buy ratings, 43% received Hold ratings, a 5.1% with Sell ratings.
The number of companies with Buy ratings increased 5.9% in the third quarter from the previous quarter. Amazon.com recorded the largest increase (+11) in the number of Buy ratings in the third quarter. On the other hand, Broadcom experienced the largest decline (-8).