As the Dow Jones Industrial Average inches toward the 20,000-point milestone, most Wall Street strategists think it will move at least a little bit higher. But the extent — and the shape — of the coming gains remain in dispute.
The big stock indices, like the Dow and Standard & Poor's 500, have surged since the election, reflecting rising confidence in surveys of audiences as diverse as consumers and home builders. The promised stimulus of federal spending increases, especially on infrastructure, and tax cuts seems to many investors to promise faster growth next year, even as incoming fourth-quarter data points to a dip from 3.2 percent annualized growth during the third quarter.
Many forecasts call for the S&P 500 to reach only 2,300 to 2,350 by the end of 2017, even though corporate earnings are set to rise as much as 12 percent, led by a quadrupling of energy-sector profits that were clobbered in early 2016 by cheap crude-oil prices. In that argument, stocks already reflect the earnings gains and have only about 1 percent to 4 percent more potential for short-term gains, according to market analysts.
Predictions for which sectors may lead the way show some of the divides between optimism and realism roiling the market since the election: Strategists are divided over the wisdom of rallies in financial and energy stocks especially, with skeptics saying banks and asset managers are now overpriced and may not get as much of a bump from deregulation as bulls think, and that oil-exporting nations will probably break their recent agreement to limit production and prop up prices.