Deere, claims, minutes — What you need to know in markets on Wednesday

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The last full trading day of the week will bring investors a light earnings schedule and three economic data points worth tracking.

In the morning, earnings from Deere & Co. (DE) will be the main corporate highlight, with the economic schedule bringing investors the weekly report on initial jobless claims, the University of Michigan’s latest report on consumer sentiment, while the afternoon will see the release of the minutes from the latest FOMC meeting.

Markets in the U.S. will be closed on Thursday for Thanksgiving and open just a half day on Friday.

Earnings from Deere on Wednesday will give investors an overview of the state of the global agricultural sector.

Elsewhere, investors will also keep track of two bits of corporate news that broke after the close on Thursday.

HP Enterprise (HPE) CEO Meg Whitman said she would step down from her post in February 2018, while Bloomberg reported that Uber had the information of 57 million riders and drivers stolen in November 2016 and concealed this information from users and regulators.

Bulls all the way up

Wall Street analysts are pretty bullish on the stock market in 2018.

Goldman Sachs became the latest Wall Street firm to release its year-ahead outlook, when on Tuesday the bank put a 2,850 price target on the S&P 500 for next year, forecasting an 11% return on earnings growth of 14%.

Goldman said it expects to see “rational exuberance” in markets through 2020.

“The current equity rally echoes aspects of the 1990s bull market,” said David Kostin, chief equity strategist at Goldman. “From its December bear market low through 1996, the S&P 500 index delivered a total return of nearly 330% (17% annualized), just slightly behind the magnitude of the current rally.”

And yet Goldman expects the current market’s fortunes to diverge from the tech bubble in the coming years, with the S&P 500 hitting 3,100 in 2020, a 20% rally over the next three years. In contrast, the S&P more than doubled during the last three-plus years of the tech bubble.

Goldman Sachs predicts stocks will rally 11% in 2018 with a continued rise into the end of the decade.

But as Yahoo Finance’s Sam Ro detailed over the weekend, strategists at BMO Capital, UBS, Deutsche Bank, and Credit Suisse have each called for double-digit returns in 2018. This makes Goldman the fifth major firm to call for another big year for stocks.

For those who are skeptical of the current market rally — or who are simply contrarians when the consensus seems to congeal around one big call — all this bullishness might seem to be setting markets up for a disappointment.

Those who know market history will see Goldman’s “rational exuberance” and immediately recall the reference to the “irrational exuberance” that former Fed Chair Alan Greenspan alluded to in a famous speech in December 1996, over three years before the tech bubble began to burst.

But the spirit of Greenspan’s comments were not to call the top in stocks, but to ask rhetorically if we can know when investor enthusiasm for certain assets has exceeded reasonable estimates of their value. When, in other words, does buying become a mania.

In Goldman’s view, this fervor has not come to U.S. markets and won’t over the coming years. And yet that the path of investor enthusiasm can be forecast is perhaps an even more foolhardy prediction than forecasting the price of stocks.

Because while stock prices may break from away from a reasonable estimate of the earnings stream produced by the underlying companies for a time, there is an agreed-upon framework underwriting market prices in a broad sense. Stock prices, in the end, usually make sense. How and why and when investors break from these fundamentals over time is a less predictable phenomenon.

[“Source-finance”]