Lower growth forecast = lower price targets

As some of you (who read the Wall Street Journal) may know, the US GDP 2H 2010 growth outlook have been lowered by many research firms in recent weeks. For example, on September 2, Morgan Stanley downgraded their outlook for second-half US real growth to 2 to 2.5% from 3 to 3.5% previously.

Largely as a result of lower growth forecast for the US economy, we are beggining to see downgrades to S&P 500 year-end targets (was about time, because the targets have so far been extremely bullish). On Tuesday, Oppenheimer lowered their price target for the end of 2010 from 1,300 to 1,225. Adjustments were also made in Barclays – their year-end target for the index stands now at 1,120 vs. previous 1,210 points. I have also mapped the targets on the graph of S&P 500 below.