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Citigroup Sees S&P Rally on Earnings, Shift to Equities

Earnings growth and the return of investors to equities will extend the U.S. bull market into a fifth year, said Tobias Levkovich, the most accurate Wall Street strategist on the Standard & Poor’s 500 Index in 2012.

“We’re looking for another double-digit gain this year,” Levkovich, chief U.S. equity strategist at Citigroup Inc., said in a Bloomberg Television interview on “Surveillance” with Tom Keene, Scarlet Fu and Sara Eisen. “You are supposed to buy when the idea of buying gets you a little sick to your stomach.”

Levkovich, whose forecast at the beginning of 2012 for the S&P 500 came within 2 points of where the index ended, forecasts the S&P 500 will climb 13 percent to a record 1,615 this year, the most bullish among the 15 strategists tracked in a Bloomberg survey.

The S&P 500 rallied 13 percent to 1,426.19 last year as corporate earnings beat estimates and the Federal Reserve expanded its bond purchase program to boost the economy. The benchmark gauge is up more than 3 percent so far this year.

Analysts predict profits for companies in the S&P 500 will rise 8.6 percent this year to a record $110.40 a share, according to data compiled by Bloomberg. The U.S. equity gauge trades at 14.8 times reported earnings, about 9.8 percent below the six-decade average of 16.4, the data show.

Individual investors, who shunned stocks during the past six years, have just started to change behavior. A record $3.1 billion flowed into U.S. stock funds in the first week of 2013, according to data compiled by research firm EPFR Global, after they investors withdrew $375 billion funds since the financial crisis began in 2007.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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