After a volatile first quarter that saw the worst performance in two years for the stock market, Wall Street analysts are seeing a lot of opportunity in the decline. As of the end of March, 57.3% of all stock ratings from individual company analysts were "buy" or an equivalent, according to FactSet. Other than February, when that number was 57.4%, that is the highest reading since September 2011. Several factors, including the start of the Federal Reserve's rate hiking cycle and the war in Ukraine, helped drag the S & P 500 into correction territory during the first quarter. However, analysts have stuck to their guns and even upgraded some stocks, seeing upside after the selloff. Despite the big-picture concerns rattling markets, analysts seem to be confident in company fundamentals. "What is driving the optimistic outlook in terms of ratings and target prices? One likely reason is that analysts have been increasing earnings estimates for S & P 500 companies in aggregate for CY 2022 and CY 2023 for several months," said John Butters, senior earnings analyst at FactSet, in a report. Stock pickers beware though, those buy ratings are not evenly distributed. "At the sector level, analysts are most optimistic on the Energy (66%), Information Technology (64%), and Communication Services (62%) sectors, as these three sectors had the highest percentages of Buy ratings on March 31," Butters wrote. "On the other hand, analysts are most pessimistic on the Consumer Staples (41%) and Utilities (49%) sectors, as these two sectors had the lowest percentage of Buy ratings on March 31." Source: FactSet FactSet also listed the top 10 stocks by analyst ratings, including Signature Bank , Assurant , Alphabet , Amazon , Microsoft and Alaska Air . Year-to-date performance for these stocks has been a mixed bag, with Assurant shares up nearly 17% as of Monday's close, and Signature Bank's stock is down more than 10% over the same period. Analysts' bullish views on individual stocks come even as macro strategists across Wall Street have been cutting their year-end targets for the broader markets. According to the CNBC Market Strategist Survey , Wall Street strategists have an average target of 4,920, or about 7% above where the S & P 500 closed on Monday. However, if you compile the individual analyst price targets, they show 16% upside, according to FactSet. History shows the analysts could prove to be right. In the year following September 2011, the last time buy ratings were near this level, the S & P 500 gained 27%.
Traders on the floor of the NYSE, March 28, 2022.
After a volatile first quarter that saw the worst performance in two years for the stock market, Wall Street analysts are seeing a lot of opportunity in the decline.