Hope you enjoyed the rally in S&P 500 stocks this year while it lasted. Analysts are already calling for some of the biggest gainers to fall.
Shares of Steel Dynamics, Nucor and C.H. Robinson, all due to drop 2% or more in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That might disappoint some investors who saw these stocks rise 5.5% or more this year.
The S&P 500's sudden reversal in February and March is a bit of a wake-up call for investors who thought all systems are go for stocks. The Federal Reserve is still threatening higher short-term interest rates. Meanwhile, the White House is talking about higher taxes, including on businesses.
"Unfortunately, we're in a market environment where every data point feels like the children's game, red light green light," said Liz Young, Head of Investment Strategy at SoFi. "The most recent market-moving event was Fed Chair Powell's testimony to Congress, which sent fed funds futures up in quick fashion. Red light."
S&P 500's Gains For Year At Risk
In many ways, seeing the S&P 500 soften this year comes as a surprise. The S&P 500 jumped more than 6% in January on the hopes the Fed's biggest rate hikes are over.
But now, the whole thesis of jumping into the S&P 500 have faded away. The S&P 500 is now barely clinging onto a gain for the year of just 2.4%. And now, the average stock in the S&P 500 is barely clinging onto a gain of 1.4%.
And some of the biggest risk is in shares of S&P 500 that ran up the most.
Steel Stocks In The S&P 500 Show Their Rust
Talk about a stock analysts think is set up for a fall. Shares of leading steel company, Steel Dynamics, are up more than 31% this year to 128.19. That easily makes it one of the top stocks in the index.
But analysts think it's got quite a way to drop. They're calling for the stock to be worth just 110.50 a share in 12 months, or nearly 14% less. Much of the downturn in the stock is explained by the company's fundamentals. Last year was boom time at Steel Dynamics. Adjusted earnings per share soared more than 40% on robust demand. But this year is an entirely different story. Analysts think the company's profit will drop by nearly half to $11.98 a share.
It's a similar story at rival steel company, Nucor. The stock is up more than 27% this year alone to 167.85 a share. But analysts think in 12 months' time the stock will fall nearly 12% to 148.13. The fundamentals show a similar trend. The company's profit jumped more than 20% in 2022. But this year, softening demand is likely to drag profit down by more than half.
It's Not Just Steel
Steel stocks aren't the only S&P 500 members analysts are warning ran up too much. Logistics company C.H. Robinson is due for a nearly 10% drop in the next 12 months, analysts say. That would come as quite a surprise for investors enjoying their nearly 13% gain on the stock this year.
Are all S&P 500 stocks up this year due for a fall? Hardly. Analysts are predicting a gain of at least 18% by the average stock in the S&P 500 in the next year. So when they're willing to flag you off of some winners, it might be worth listening.
Analysts Says These S&P 500 Stocks Up Are Due To Fall
All are expected to fall in the next 12 months, despite being up 5.5% or more this year
| Company | Ticker | Year-to-date % ch. | Implied downside | Sector |
|---|---|---|---|---|
| Steel Dynamics | 31.2% | -13.8% | Materials | |
| Nucor | 27.3 | -11.8 | Materials | |
| C.H. Robinson Worldwide | 12.9 | -9.7 | Industrials | |
| Expeditors International of Washington | 6.1 | -9.5 | Industrials | |
| Rockwell Automation | 16.1 | -6.5 | Industrials | |
| Clorox | 6.4 | -5.3 | Consumer Staples | |
| First Solar | 41.1 | -4.9 | Information Technology | |
| Robert Half International | 6.8 | -4.3 | Industrials | |
| Snap-on | 8.1 | -3.5 | Industrials | |
| Packaging Corp. of America | 6.0 | -3.3 | Materials | |
| Franklin Resources | 5.5 | -3.3 | Financials | |
| Otis Worldwide | 7.5 | -2.3 | Industrials |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
