Buy rating hits a new high, does Wall Street really believe US stocks can rise?

According to the latest analysis from Jefferies LLC, following a surge in May, the proportion of "buy" ratings given by Wall Street analysts on S&P 500 constituents has reached a new high in over twenty years.

On the surface, this is usually a signal that the market bubble is about to correct, but Andrew Greenebaum from Jefferies believes there is no need for excessive concern after a deep analysis.

Greenebaum pointed out a key contradiction: although over 80% of S&P 500 constituents have received buy ratings, the analysis shows that the corresponding 12-month target prices imply only an average increase of 10%, which is comparable to historical benchmarks for U.S. stocks. This data indicates that the current rebound has not yet exhausted its momentum.

Greenebaum, Senior Vice President of Equity Research Product Management at Jefferies, stated, "Wall Street is raising ratings on the opportunity of stock price corrections, but the limited gap between target prices and current prices indicates that analysts are not blindly optimistic."

The S&P 500 index has rebounded nearly 20% since the low point in April, mainly due to the easing of tariff pressures from the Trump administration. However, against the backdrop of fluctuating government trade policies, analysts and strategists continue to adjust market expectations.

Greenebaum emphasized that compared to the general year-end target for the S&P, individual stock analysis better reflects the true direction of the market, as it takes corporate earnings fundamentals into fuller consideration.

He estimated the comprehensive target for the S&P 500 over the next 12 months to be 6,528 points, indicating a 10% upside from last Friday's closing price.

He stated that if ratings and target prices are used as judgment criteria, the market is actually in a normal range. Greenebaum advised investors to ignore strategic noise and focus on fundamentals, as analysts have not observed any deterioration in corporate fundamentals.

Expectations Disrupted

However, the anxiety of forecasters has not dissipated—Trump's erratic tariff policies have led to significant fluctuations in the expectations of sell-side strategists. After collectively lowering expectations in April, well-known analysts such as Ed Yardeni from Yardeni Research and David Kostin from Goldman Sachs have begun to reverse their predictions.

Economists warn that despite a softening of related rhetoric since the imposition of high tariffs on April 2, business and consumer confidence has suffered substantial damage, which may be reflected in economic data in the coming months.

From one perspective, cracks have already appeared in the economy. The U.S. Bureau of Economic Analysis released revised data on Thursday showing that the annualized quarterly GDP decreased by 0.2% in the first quarter, slightly narrowing from the initial decline of 0.3%. On the other hand, while the labor market remains resilient, investors are closely watching next week's non-farm payroll report to verify the strength of the economy "Analysts' target prices are actually quite restrained," Greenebaum summarized, "when the expected increase is only a modest double-digit percentage, the market is indeed lackluster."