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Credit Suisse sets 2018 forecast for stock market, predicts big double-digit gain

  • Credit Suisse forecasts the S&P 500 will rise 13 percent by year-end 2018 from Monday's close, according to the firm's latest market strategy note.
  • "Our market views are predicated on a supportive economic backdrop, with benign recessionary risks and a pickup in near-term indicators," strategist Jonathan Golub writes in the note to clients Monday.
Joseba Etxaburu | Reuters

As the stock market hit another record high Tuesday a top Wall Street firm is telling its clients the nine-year bull market will continue for at least one more year ... and with force.

Credit Suisse forecasts the S&P 500 will rise 13 percent by year-end 2018 from Monday's close, according to the firm's latest market strategy report.

"Our market views are predicated on a supportive economic backdrop, with benign recessionary risks and a pickup in near-term indicators," strategist Jonathan Golub wrote in a note to clients Monday. "While we expect more muted longer-term growth, this has focused corporations on cost containment and the return of capital to shareholders, extended the business cycle and lowered discount rates."

The strategist initiated S&P 500 price targets of 2,600 and 2,875 for year-end 2017 and year-end 2018, respectively. Golub joined Credit Suisse earlier this year from a similar role at RBC Capital Markets.

His 2018 price forecast is based on a 6.9 percent increase in the market's earnings next year and a 3.7 percent rise in its price-earnings valuation multiple.

He also shared his favorite sector calls for the coming year.

"Against this backdrop, financials should outperform the broad market, with deregulation providing a tailwind to the sector," he wrote. "Technology is our favorite sector despite elevated multiples. Fundamentals remain strong given the group's exposure to secular growth themes in subgroups such as internet and software-as-a-service."

The strategist has overweight ratings for financials, technology and discretionary. On the flip side, he has underweight ratings for energy, utilities, telecom and REITs.

The S&P 500 is up 14 percent year to date through Monday's close of 2,545.

As the end of the year approaches, Wall Street strategists are starting to look out to next year. Credit Suisse is the second major bank to issue an official 2018 price target. Wells Fargo in September gave a lackluster S&P 500 price range forecast of 2,450 to 2,550.