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* S&P 500 index to reach 2,350 by end-2017
* Dow to end 2017 at 20,450
* Trump promises on changes to trade a worry
By Caroline Valetkevitch
NEW YORK, Dec 7 The U.S. stock market's bull run
since 2009 will extend into 2017 if President-elect Donald
Trump's plans to stimulate the economy with infrastructure
spending and financial deregulation come to pass, according to
strategists in a Reuters poll.
But limiting the enthusiasm are threats by Trump to consider
imposing new import tariffs and the prospect of a potentially
stronger dollar, with the S&P 500's end-2017 forecast up
about 6 percent from current levels.
The benchmark index will end 2017 at 2,350 and finish 2016
at 2,210, according to the median forecast of around 40
strategists polled by Reuters over the past week. It closed
Tuesday at 2,212.23.
Wall Street has rallied and hit record highs since
Republican Trump unexpectedly won his White House bid in the
Nov. 8 U.S. election.
Worries about his controversial policies leading up to the
election have given way to optimism over promises for lower
taxes, fewer regulations and more spending. The S&P 500 is up 8
percent year-to-date, having gained over 2 percent in the weeks
since the election.
"Right now it looks as if the bull market is on, and the
risks are that even guys like me who put out a very optimistic
call were too conservative," said Jonathan Golub, chief equity
strategist for RBC Capital Markets in New York. His forecast for
the S&P 500 to end 2017 at 2,500 was among the highest in the
The S&P 500 has gone up every year since 2009 except in
2011, when it ended flat, and in 2015, when it posted a slight
Part of the expected stock gains will be fueled by a rebound
in corporate profits following weak growth in 2016, strategists
Analysts expect S&P 500 companies' profit growth of 12.4
percent for 2017 compared with a forecast gain of just 0.9
percent in 2016, Thomson Reuters data shows. A year ago, 2016
profits were expected to grow 8.3 percent.
Profits need to pick up to prevent stocks from getting too
expensive though, strategists said, with the S&P 500 now trading
about 17 times forward earnings, compared with a long-term
average of about 15, according to Thomson Reuters data.
Sectors many of the strategists expect to do well next year
are technology, industrials and other cyclicals that tend to
benefit from an improving economy. Many also favor financials,
which have had a strong run since the election on Trump's plans
to cut regulations for the group.
On the flip side, strategists see a less favorable year for
utilities and other sectors that tend to underperform in a
rising interest rate environment.
Investors expect the Federal Reserve to raise rates in
December, and some strategists worry that the pace of future
rate hikes to deal with a potential pickup in inflation might be
too fast for the economy to handle.
While the deck seems stacked in favor of further gains next
year, uncertainties abound, especially since no one knows yet
which of Trump's plans will actually materialize into policy.
Strategists cited possible trade friction and protectionist
policies as among the biggest worries for next year.
Trump has said he would quit the North American Free Trade
Agreement unless it is renegotiated to his satisfaction and that
he would declare China a currency manipulator to force
negotiations for better trade terms.
His suggestions that his administration could impose 45
percent across-the-board tariffs on goods from China have drawn
threats of retaliation by Chinese state media against U.S.
soybeans and companies such as Boeing Co and Apple Inc
During the presidential campaign, Trump said his
administration would put a 35 percent import tariff on goods
made by American manufacturers that moved jobs
"The rally could be cut short if Trump embarks on the more
confrontational trade agenda," said John Praveen, managing
director at Prudential International Investments.
The dollar, which has strengthened sharply since the
election, is likely to dampen earnings for U.S. multinationals
if it stays on the same path.
This poll's 2017 year-end S&P 500 target is up from a
forecast of 2,310 in the October stocks poll.
The Dow Jones industrial average will end 2017 at 20,450, a
gain of 6 percent from Tuesday's close of 19,251.78, the Reuters
(For poll data )
(For other stories from the Reuters global stock markets
(Additional reporting by Sinead Carew, Chuck Mikolajczak, Lewis
Krauskopf, Rodrigo Campos in New York and Noel Randewich in San
Francisco; Editing by Ross Finley and W Simon)