Prepare for a good year on Wall Street—just not 2017 good, says JP Morgan Private Bank

The markets once again seem invincible, as the S&P 500 Index ended its best week in more than 5 years, reversing course from an ugly selloff in early February.

However, some analysts say investors should temper expectations. Wall Street probably won’t see the kind of charging bull market gains it saw in 2017, according to Monica DiCenso, global investment specialist at J. P. Morgan Private Bank.

“It’s hard to imagine that you’ll see a repeat of 2017,” DiCenso told CNBC’s “Trading Nation” last. “It doesn’t mean that we can’t see very strong returns.”

While the S&P 500 surged 20 percent in 2017, DiCenso now anticipates tamer gains, akin to the advance seen in 2014 when it rose a comparatively modest 11 percent.

“Think 11 to 13 percent from here, which of course in the context of history is very strong,” she said. “When you look at fundamentals, which is how we think about the market, it’s hard to get to a number of 20 to 25 percent just based on earnings growth.”

An increase of at least 11 percent on the S&P 500 still puts it above the historical average. The S&P 500 increased an average 8 percent in the past decade: 2008 was its worst year in the past 10 with a 39 percent decline, while 2013 was the best with a 30 percent rise.

The equities market’s resilience was evident last week, as it shook off the sharp decline seen in the first full week of February. During the week ended Feb. 9, the Dow Jones plummeted more than 1,000 on two separate trading sessions — making history — while the S&P 500 closed the week with a 5 percent drop, its worst since January 2016.

But, since then, markets have bounced back. The Dow is now within striking distance from all-time highs set on Jan. 26, while the S&P 500 is roughly 5 percent from its own record set the same day.

Both indexes clawed their way out of correction territory, a level representing a 10 percent drop from 52-week highs, and have returned to positive ground for the year.

The key to the comeback is a refocus on what matters to equity value, DiCenso said: The market’s underlying fundamentals.

“When you see a quick correction, it doesn’t feel like it’s based on fundamentals,” she said. “Look at earnings growth, you look at the growth in the economy and really you look at everything we heard from companies through this past earnings season, it’s all been really good.”

Roughly four-fifths of the S&P 500 have released fourth-quarter earnings so far this reporting season. Of those, 77 percent have exceeded profit estimates and 78 percent have topped sales expectations, according to Thomson Reuters. The blended growth estimate came in at nearly 15 percent year over year.

This year’s earnings are expected to continue along the same track. Analysts surveyed by FactSet expect earnings growth of 18 percent in 2018, accelerating from a nearly 12 percent increase in 2017. This year should mark the third year of earnings growth.

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