Why Deutsche Bank Thinks The S&P Is Going To 2,500 Next
For the past year, Deutsche Bank was one of the most stubbornly pessimistic banks. Then, overnight, everything changed for one reason: Donald Trump.
The German bank laid out its 180-degree change in opinion in a 30-page Friday note titled “Trump: the huge picture for stocks”, in which it revealed that it now expects the S&P to easily rise to 2,250 by Trump’s inauguration, and then rise to 2,500 by 2018 “before suffering its next bear market.”
While not necessarily the “huge picture”, here is the big picture summary of DB’s note:
In the first week of President elect Trump, most of our investor conversations centered on their concerns about a higher fiscal deficit lifting Treasury yields and pressuring PEs and a stronger dollar/ weak oil prices pressuring the EPS outlook and the possibility of protectionism. While we don’t ignore such risks, we think the market is under appreciating the likely big boost to S&P EPS from a lower corporate tax rate and the boost to Bank profits from rising yields (and lower pension expense) and the much higher chance now of a long lasting economic expansion that rivals the 10 year US record. We’re more confident now that the S&P will reach 2500 in 2018 before suffering its next bear market.
This post was published at Zero Hedge on Nov 20, 2016.