Majority of Street strategists see S&P rising 5% by year-end, pushed higher by strong Q2 earnings: CNBC survey

  • Despite growing trade tensions Wall Street’s top strategists see the S&P rallying at least 5% before the end of the year.
  • Top sector buys include technology, energy, and financials.
  • Strategists believe the biggest risks to the rally include rising rates and geopolitical tensions.
  • More than half of respondents believe Q2 earnings will beat expectations.

The major averages finished Q2 and the first half of the year on a high note, with the Dow and S&P posting their 10th positive quarter in 11, while the Nasdaq turned in its 8th straight quarter of gains. And a majority of Wall Street’s top strategists see no signs of a slowdown ahead.

Despite growing trade tensions that rattled markets at the end of the second quarter, 71% of respondents in CNBC’s exclusive “Halftime Report Stock Survey” said they believe the S&P will finish the year at least five percent higher than current levels.

The index closed at 2,794 on Monday, so a gain of 5% would push the S&P to 2,933 - which is above its current all-time closing high of 2,872.8 hit on January 26.

Just over a fifth of respondents think the S&P will end the year flat, and 7% see the index falling 5% or more.

Investors who believe this bull market no longer has room to run often cite slowing earnings growth as a potential headwind for stocks. This is especially true after earnings grew 25% in the first quarter which, according to FactSet, was the fastest rate in 8 years.

But according to the Stock Survey, a majority of strategists believe companies will continue to report a growth in profit, which will help push the S&P higher by year end. 54% of strategists said they believe Q2 earnings will beat expectations, and 46% said they believe results will be in-line.

Technology is the best-performing S&P sector this year, and strategists continue to like the space going forward. 79% of respondents said they have a “buy” rating on tech, while 45% like energy and 43% like financials.

Energy has outperformed the broader market over the past 3 months, and the sector is coming off its best quarter since 2011. The sector rose 12.69% in Q2, pushed higher as oil broke above $74 for the first time since 2014.

Despite the strategists’ overall bullish sentiment, they do highlight some key risks that could derail the rally -- chiefly rising rates and geopolitical tensions.