The Standard & Poor’s 500 Index may rise 8.8 percent to an all-time high of 1,600 by the middle of the year as global economic growth accelerates and corporate profits increase, according to Stifel Nicolaus & Co.
Investors should buy shares of financials, technology companies and commodity producers as the economy strengthens, Barry B. Bannister, an equity strategist at Stifel, said in a research note today. He recommended avoiding so-called defensive stocks, such as utilities and telephone companies, because they have slower earnings growth.
The U.S. equity benchmark reached a five-year high last week amid optimism about fourth-quarter corporate earnings and signs that China’s economy is improving. Wall Street equity strategists predict the S&P 500 will finish the year at 1,534, according to a survey of 15 banks and brokerages surveyed by Bloomberg.
The global economy is forecast to expand 2.4 percent in 2013 and 3.2 percent in 2014, according to the median economist forecast in a Bloomberg survey. Earnings for companies in the S&P 500 may increase 8.6 percent this year after growing 4.4 percent last year, analysts’ estimates tracked by Bloomberg show.
The S&P 500 will probably retreat in the fourth quarter amid political tensions after Iranian elections in June and rising gasoline prices as Saudi Arabia cuts production, Bannister said. He predicted the index will end 2013 between 1,400 and 1,600.