Despite Trump euphoria, Wall Street's 2017 forecast is the most bearish annual outlook in 12 years

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Even after post-election animal spirits boosted the S&P 500 to a near double-digit annual return in 2016, Wall Street's soothsayers — equity strategists — are the most bearish on equities for 2017 as they have been about a year since 2005.

Wall Street's consensus forecast calls for a little more than a 5 percent gain in 2017, the smallest increase predicted since a 2.8 percent forecast heading into 2005, according to Bespoke Investment Group.

Source: Bespoke Investment Group

(Note: The Bespoke table is from before the final trading day of the year. Adjusting for the S&P 500's actual 2016 close of 2,238.83, the consensus forecast equals a 5.5 rise.)

The bearishness has many investors feeling good about the prospects for the new year. History bears that contrarian viewpoint out as the strategists' consensus forecast turned out to be too bearish for 6 of the last 8 annual periods during this bull market, according to the chart above.

Here are the 2017 forecasts by firm:

Source: Bespoke Investment Group

JPMorgan's Dubravko Lakos-Bujas is near the middle predicting the S&P 500 will rise to just 2,400 by the end of the year. In his outlook note last month, the strategist captured the opposing forces causing Wall Street sages to be more cautious than the trading crowd:

"The prospects of pro-growth policy reforms under the Trump administration (i.e., deregulation, tax reform, fiscal spending) should continue to push the market higher. ... However, rising yields and USD are the main risks to our positive equity outlook. This week's incrementally hawkish tone from the FOMC meeting is raising the hurdle for both expanding equity multiple and corporate profitability. ... Historically, a 6% rise in trade-weighted USD pressures S&P 500 EPS by roughly 2-3%."

Bull markets tend to end with this group overly bullish, not bearish. For example, they expected an 11.1 percent increase in the S&P 500 in 2008, a year when a bull market ended with a plunge in the index of almost 40 percent because of the housing crisis, according to Bespoke.

For the bullsish strategists, this year is a simple one to forecast. They argue that Trump's tax cuts and economic policies are going to lead to higher earnings and stock prices follow profits.

Here's what RBC's Jonathan Golub, the only strategist calling for a 10 percent or greater S&P 500 gain this year, wrote in a note last month.

"Following two years of near-zero growth, we expect profits to re-accelerate ... 2018 EPS growth (+9.4%) assumes a 2–3% impact from Trump policies. This placeholder for changes in taxes, regulation, and spending is quite modest, in our view, as an adjustment to corporate taxes alone could easily double this impact. ... We believe multiples will advance more quickly than earnings over the near term, as analysts wait for clarity on Trump policies before adjusting estimates."

In a rare spot for the firm, Goldman Sachs is tied for being the most bearish on Wall Street. Goldman's David Kostin said in a note this weekend he doesn't believe Trump can deliver all that he has promised, even with a Republican-led Congress:

"S&P 500 will rally to 2400 in 1Q 2017 alongside enthusiasm over corporate tax cuts, but budget constraints will limit the magnitude of tax reform and fiscal spending and the index will fade to 2300 by year-end."

Bespoke doesn't just number crunch, it uses those historical figures to give a market outlook to clients as well. The firm is on the cautious side for 2017, believing that this bull market doesn't have the fundamental underpinnings to be one of the greatest of all time.

What the firm wrote in its 2017 outlook note last month:

"The S&P 500 has now been up on a total return basis for eight straight years of which we have been mostly bullish over that span. The all-time record for consecutive up years is nine (1991-1999), so another year of gains would tie that record, which would be great. We hope that 'Everything that's wonderful is sure to come your way,' but our concern is that there will at least be some trouble along the way. Markets typically climb a wall of worry, but right now there doesn't seem to be much of it around."

For a group constantly accused of being perma-bulls, the 2017 outlooks are quite tepid. Recent history shows strategists have underestimated this bull market from the start. Given the gains on Tuesday, investors are betting they are doing it once again.