Smallest S&P 500 Gain Since 2005 Seen by Equity Strategists

Forecasters at securities firms are more conservative on U.S. stocks than any time in seven years, predicting the Standard & Poor’s 500 Index will rise 6.4 percent in 2012 as budget deficits around the world limit gains.

The benchmark gauge will climb to 1,338 after it was virtually unchanged in 2011 and the U.S. beat every equity market in the developed world except Ireland, according to the average forecast of 13 strategists tracked by Bloomberg. That’s the smallest predicted return since 2005. Adam Parker of Morgan Stanley, whose estimate for 2011 proved the most accurate among current analysts, forecast a loss of 7.2 percent as Europe’s debt crisis will keep volatility above historical levels.