There's one sell-side analyst who managed to predict this year's volatile markets and he doesn't come with a wizard nickname in recognition of his prognosticative skills.
Deutsche Bank strategist Aleksandar Kocic wrote earlier this year that the S&P 500 Index could hit a floor of between 2,300 and 2,400 as the Federal Reserve normalises monetary policy. The benchmark equity index reached 2,351 on Dec. 24 and has since rallied 6.5 per cent to about 2,500.
His prediction stands in stark contrast to many others on Wall Street in a year characterized by intense swings. As 2017 drew to a close, the median target for the S&P 500 at the end of 2018 stood at 2,855, according to a Bloomberg tally. Even Marko Kolanovic -- the JPMorgan Chase strategist dubbed "Gandalf" -- predicted only a modest uptick in volatility for the year.
How did Kocic nail the move in a year that saw many other professional forecasters founder as worries over economic growth, trade tensions and political gridlock whiplashed equities? With a relatively simple theory about the Fed's impact on markets and the notion that the central bank "put" which has backstopped risk-taking is now being repriced.
"Despite all the political entropy, our view has been that the market is simply misreading the outdated and unreliable signals and making incorrect conclusions about the economy, and using that information to scale down on risk," Kocic wrote in a December 27 email to clients seen by Bloomberg. "Although the equities whipsaw continues around the Fed put, the strike around 2,300 (as we predicted in Feb and reiterated in October) seems to be doing all right."
