Survey: Stocks forecast to rise 9% over coming year, say top experts

For the fourth straight quarter, experts believe the stock market will rise in the next 12 months, according to a new survey by Bankrate. The Third-Quarter Market Mavens survey shows that analysts expect the Standard & Poor’s 500 index to climb 9 percent over the next year. Like last quarter, not a single respondent expects the market to fall.

In total, these experts predicted the S&P 500 would close the period at a price of 4,875.73, compared to its closing price of 4,473.75 at the end of the survey period.

This article is one in a series discussing Bankrate’s Market Mavens third-quarter survey. We asked experts where stocks were headed in the coming year and in the next five years, and where investors might see the highest returns. We also asked them where the 10-year Treasury yield will go, the best places to invest $10,000 today and when to expect the market to decline.

Experts: S&P 500 to rise 9 percent over the next year

The market’s been mostly rising over the last year, but the survey’s respondents remain upbeat about future returns. They expect stocks to climb 9 percent over the next 12 months. That figure is largely in line with the market’s long-term average annual return of 10 percent.

Their estimate is also in line with their predictions in the last few quarters, too. They expected 8.7 percent in the second-quarter survey, 8.5 percent in the first quarter and 8.9 percent in the fourth-quarter 2020 report. So these experts have remained consistently optimistic.

Notably, every single respondent surveyed by Bankrate expected the market to climb, ranging from a low estimate of 4,500 to the upper end at 5,900. That optimism may surprise many investors, especially after the market’s run since the bottom of the crash in March 2020.

Nearly 47 percent expect stocks to perform in line with their long-run average over next five years

The experts surveyed by Bankrate remained cautiously optimistic about the market over the next five years:

• About 47 percent said the market would perform at the same level as its historical average.
• Around 13 percent expected returns would likely be better than the long-run average.
• Exactly 40 percent said returns would be below the historical average.

Those figures were largely in line with the results of Bankrate’s recent surveys, and respondents varied significantly in their reasons for the estimates.

“We expect easy money and low inflation until the bond market conclusively proves us wrong,” says Kenneth Tower, chief market strategist, Quantitative Analysis Service, pointing to persistently low interest rates and the Fed’s accommodative policy as reasons to expect the market will outperform its historical average.

But other respondents were not quite as optimistic, such as Wayne Wicker, chief investment officer, MissionSquare Retirement. He expects returns to be in line with historical averages.

“Equities will continue to benefit with higher earnings trends based upon better productivity tools as well as a reasonable fiscal and monetary policy,” says Wicker.

“The rolling 5-year compound annual growth rate for the S&P 500 is currently 14.7 percent versus the 100-year average of 6.0 percent. Reversion to the mean is likely,” says Sam Stovall, chief investment strategist, CFRA Research, who expects lower returns over the next five years.

Experts prefer U.S. stocks and value stocks

Bankrate’s survey also queried the experts on whether they preferred U.S. stocks or global stocks better and whether they liked growth equities or value stocks better. Overall, respondents favored value stocks and U.S. stocks. Here’s how the numbers break down:

• More than 53 percent tapped U.S. stocks to outperform global stocks.
• Just 20 percent preferred global equities over the next 12 months.
• Nearly 27 percent expected the returns to be about equal.

That was a marked shift from the second-quarter survey, when more than 64 percent of respondents preferred global stocks over 36 percent who liked their U.S. counterparts.

“More people going back into the workforce will provide positive momentum for the U.S. economy,” says Mark Willoughby, senior vice president, Janney Montgomery Scott. “Couple that with a benign interest rate background and the domestic market should outperform global indices.”

Patrick J. O’Hare, Briefing.com chief market analyst, was one of the relatively few who picked global stocks to outperform. He says: “With the turn into 2022, the U.S. should be battling with more headwinds, including stretched valuations along with the specter of rising interest rates, tough earnings comparisons, higher tax rates, and midterm election uncertainty.”

And which will perform better – growth stocks or value? The experts here prefer value stocks:

• Nearly 47 percent of analysts cited value stocks as their top pick.
• More than 33 percent favored growth stocks.
• Exactly 20 percent of respondents expected returns to be about the same.

The numbers were broadly similar to the recent results of the survey, with respondents seeing value stocks as outperformers.

“Value holds the greatest earnings per share growth potential, and lower valuation, today,” says Stovall.

Sameer Samana, senior global market strategist, Wells Fargo Investment Institute, agrees that value is primed to outperform: “We think higher rates and higher commodity prices will tilt the balance towards value.”

But growth stocks remain the pick of other experts such as Kim Forrest, chief investment officer/founder, Bokeh Capital Partners.

“Some of the ‘value’ names will get a bump, but it will be because there are demands for the product/services – so the stocks are essentially driven by growth,” says Forrest.

Quotes from the experts

We are still the best positioned area in the world. We have fewer lockdowns than the large areas and are further along to ‘back to normal,’ whatever that is.

— Kim Forrest, chief investment officer/founder, Bokeh Capital Partners

There will continue to be a fairly active rotation between growth and value sectors over the next year, much the same as there has been this year. Therefore, the S&P 500 with an equal mix of both factors is a fairly optimal destination.

— Dec Mullarkey, managing director, SLC Management

With limited returns expected over the next year at the index level, and concerns about slower growth building as the year progresses, we expect growth to maintain a leg up over value.

— Patrick J. O’Hare, Briefing.com chief market analyst

Methodology

Bankrate’s third-quarter 2021 survey of stock market professionals was conducted from Sept. 8-16 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Chuck Carlson, CFA, CEO, Horizon Investment Services; Patrick J. O’Hare, Briefing.com chief market analyst; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Tom Lydon, CEO, ETF Trends; Sam Stovall, chief investment strategist, CFRA Research; Kenneth Chavis IV, CFP, senior wealth manager, LourdMurray; Dec Mullarkey, managing director, SLC Management; Kenny Polcari, managing partner, KACE Capital Advisors; Clark A. Kendall, president and CEO, Kendall Capital Management; Kenneth Tower, chief market strategist, Quantitative Analysis Service; James Iuorio, managing director, TJM Institutional Services; Mark Willoughby, senior vice president, Janney Montgomery Scott; Robert Johnson, professor of finance, Creighton University; Wayne Wicker, chief investment officer, MissionSquare Retirement.