The Standard & Poor’s 500 Index will extend its record rally as the U.S. central bank continues using economic stimulus as a way to reduce unemployment, according to Scott Black, president of Boston-based Delphi Management Inc.
He recommended buying shares of Ensco PLC (ESV), a London-based oil-drilling company, and Amdocs Ltd. (DOX), which produces telecommunications software in Chesterfield, Missouri. Companies in the S&P 500 will earn about $105 a share this year, Black said. That’s a 3.9 percent increase from last year, data compiled by Bloomberg show.
“There’s room to go on the upside, especially since you’re getting nothing on the fixed-income side,” Black said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee from Boston. “There’s every indication that Ben Bernanke is going to remain accommodative because we’re not even near the threshold where he wants to get unemployment back under 6.5 percent.”
Federal Reserve Chairman Ben S. Bernanke has kept overnight interest rates near zero since December 2008 and embarked on a bond buying program that has expanded the central bank’s balance sheet to more than $3 trillion. The Fed has pledged to maintain this policy as long as U.S. unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
U.S. employment picked up more than forecast in April and the jobless rate unexpectedly declined to a four-year low of 7.5 percent, according to a report from the Labor Department last week.
The S&P 500 rose to 1,625.96 yesterday for its fourth straight record high. The Dow Jones Industrial Average increased to 15,056.20 for its first close above 15,000.
The S&P 500 may finish the year at 1,601 with earnings per share of $108.42, according to the average estimate of equity strategists surveyed by Bloomberg. The benchmark gauge for American equity is trading at 15.9 times reported earnings, the highest multiple since 2010.
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