Wells Fargo Advisors: More Record S&P 500 Highs Are On the Way

Tuesday, 18 Jun 2013 08:03 AM

By John Morgan

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Better times may be ahead as Wells Fargo Advisors' so-called "misery index" is declining in an indication that the Standard & Poor's 500 Index could hit 1,900 next year — a fresh record high and a gain of about 18 percent over current levels.

"We encourage investors underinvested in equities to begin to average into positions through the end of this year with an eye toward appreciation over the balance of this economic recovery," the firm said in its 2013 Midyear Economic and Market Outlook report for clients.

Wells Fargo Advisors is calling for the S&P 500 to hit as high as 1,700 by the end of 2013, with a preliminary target of 1,850 to 1,900 for 2014.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

"In fact, the economy appears to be in a 'sweet spot' with declining unemployment and moderating inflation simultaneously," the report stated. The relative jobless rate and inflation rate combine to create the firm's "misery index."

Wells Fargo Advisors' 2013 year-end forecast calls for 2.5 percent inflation-adjusted gross domestic product, 7.2 percent unemployment and 2 percent annualized inflation.

Stuart Freeman, the firm's chief equity strategy, said "stocks are quite cheap versus Treasurys and cash alternatives, and yet investors remain quite skittish regarding the buying of stocks."

Freeman forecast 2013 year-end S&P 500 earnings of $108.

"The global economy is awash in liquidity. The U.S. economy is expected to grow at a faster pace this year than last and a modest but faster pace next year again than this year," he predicted.

Jeffrey Roof, president of Roof Advisory Group, told Investment News his clients are already at maximum equity exposure, but that more gains are coming.

"We still see equities now and going forward having far greater potential of upward appreciation and less downside risk than alternatives like fixed-income categories and certainly cash," Roof said. "We see clients in large cash positions losing dollars."

MarketWatch reported both JPMorgan Chase and Credit Suisse remain overweight on equities for a variety of reasons, including favorable bond yields, investor sentiment, valuations, risk appetite and corporate buybacks.

Andrew Garthwaite, managing director for global equity strategy at Credit Suisse, said markets are overly bearish in trying to time the end of quantitative easing by the Federal Reserve. Credit Suisse has a year-end S&P 500 target of 1,730.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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