* cpurl://apps.cp./cms/?pageId=stock-index-poll Reuters poll
NEW YORK, March 29 A U.S. stock rally fueled by
optimism President Donald Trump will boost the economy may be
near its peak, according to a Reuters poll of strategists who
forecast U.S. shares will gain less than 3 percent between now
The run up since the Nov. 8 U.S. election has left the S&P
500 at levels many consider overvalued, and some
strategists say a lot depends this year on whether the new
administration will be able to push through tax reform or other
Republican leaders late on Friday pulled their legislation
to overhaul the U.S. healthcare system, dealing a setback to
Trump in his first legislative initiative.
Some investors have seen the failure of the bill as a way to
move forward action on tax reform, but last week's wrangling
over the bill caused stocks to stumble.
In its post-election rally, the S&P 500 rose as much as 12
percent, hitting an intraday high of 2,400 on March 1. It is now
up around 9 percent since the election.
Based on the median forecast of over 40 strategists polled
by Reuters over the past week, the S&P 500 will hit 2,355 by
mid-2017 and finish the year at 2,425, just 2.8 percent above
where the index closed on Tuesday but up about 8 percent from
The S&P 500 is already up about 5 percent in 2017.
Julian Emanuel, executive director of U.S. equity and
derivatives strategy at UBS Securities in New York, said stocks
have been pricing in a "strongly" pro-growth agenda.
"But it has yet to be fully implemented, and the devil is in
the details of implementation," said Emanuel, who sees the S&P
500 ending this year at 2,300 and said he is "cautious" on
stocks near term.
At the same time, the poll's median forecast is up from the
December poll's 2,350, and some banks have bumped up targets
substantially. Credit Suisse raised its year-end 2017 S&P target
to 2,500 from 2,300.
Some strategists remain upbeat on some of the biggest
beneficiaries of the Trump rally including financials, and many
expect stronger economic growth to help earnings more than
The S&P 500 is trading at nearly 18 times expected earnings,
well above its long-term average of 15, according to Thomson
While analysts expect S&P 500 profit growth of 11 percent
this year - a big increase over 2016's 1.4-percent growth -
investors worry whether it will be enough to justify current
Of all Trump's election promises, tax reform could have the
biggest impact on earnings, so "if we get corporate tax reform
light, that could disappoint," said Mark Luschini, chief
investment strategist at Janney Montgomery Scott in
Interest rates are expected to continue to rise this year,
which could be another factor limiting stock gains if the pace
of rate hikes is faster than Wall Street is planning.
The U.S. Federal Reserve raised rates this month, and Wall
Street's top banks see two additional rate hikes this year, a
separate Reuters poll showed.
Most respondents in the stocks poll said a 10-percent S&P
correction before mid-year is unlikely, while they were roughly
split over whether there will be one by year-end.
The last 10-percent correction in the S&P 500 was at the
start of 2016.
The Dow Jones industrial average is projected to end 2017 at
21,250, about 3 percent above Tuesday's close, the poll showed.
(Other stories from the Reuters global stock markets poll:
(Additional reporting by Chuck Mikolajczak, Noel Randewich,
Sinead Carew, Lewis Krauskopf and Rodrigio Campos; Editing by