Is the US stock market “cheap” right now...or not? Let’s take a look, writes John Blank, chief equity strategist at Zacks Investment Research.
Entering 2026, share returns were excellent – for an unusual three years in a row. But this calendar year is trading differently. Through April 1, the Dow Jones Industrial Average was down 2.7% and the S&P 500 Index (^SPX) was down 3.5%. The Nasdaq was down 5.5%.
The historical expected annual return (using data from 1930 to 2021) for stocks is +7.9%. Over the last 30 years? +11.1%. So, 8,349 is the “bottoms up” target for the next 12 months on the S&P 500. That is 28.9% over a recent closing price of 6,477.
S&P 500 Index (^SPX)
By sector, information technology remained dominant at “Very Attractive” as of March 31. Semiconductor EPS growth gets bolstered via AI chip demand. Electronics demand is great, too. Energy rose to a “Very Attractive” rating in March, with the Iran conflict a major cause for the upgrade.
Utilities rose to “Very Attractive.” Communication services did, too. Financials fell to “Market Weight.” Rising recession risk, the private credit debacle, falling share prices, and possible Fed rate hikes downshifted the momentum here.
Zacks “Fair Value for Year End 2026” is 7,064. For YE 2027? It is 7,996. That shows investors the current moment is showing an attractive entry point.
Of course, that assumes the Iran conflict comes to a graceful end. Otherwise, this moment may well be a value trap for the bulls.
