The S&P 500 is poised for its largest annual increase since 1997, provided that history repeats itself. Data compiled by Bloomberg and Standard & Poor’s is banking on this in predicting the potential year-end results for the stock market. Since 1928, November and December have seen share increases 82 percent of the time. On average, shares rise 6 percent.
If the historical trend continues, the S&P 500 would reach an all time high of 1,862.79. For Director of Investment Strategy at BNY Mellon Wealth Management, Jeff Mortimer, it would be folly to disregard current market trends. “You have to pay attention to momentum in markets and that’s what this calendar year is showing,” Mortimer told Bloomberg.
Chief market strategist for global brokerage firm ConvergEx Group, Nick Colas, outlined the case for a continued, strong market in a note to clients, which was reported on by Business Insider. ”Put aside the ghost stories, at least for the remainder of 2013,” he wrote, “there’s one more rally left in global equities, led by U.S. stocks.” U.S. stocks would lead the way in the rally because high, consistent corporate earnings are too good an investment to “walk away from.”
But not everyone is as willing to “put aside the ghost stories.” Jan Loeys, head of asset allocation at JPMorgan, wrote a note to his clients as well, also covered by Business Insider. Loeys sees the strength in the markets, but also a risk stemming from economic growth. ”Paradoxically, low growth does not contradict higher asset prices, but is at its roots, as a weak recovery induced policy easing, which boosted asset prices. This summer’s taper-talk crisis highlights that a sudden spurt in growth is the biggest risk to asset reflation. A gentle grind up is our preferred scenario.”
Michael Gayed, Pension Partners‘s Chief Investment Strategist, takes it a step further. Gayed rang warning bells to CNBC last week, saying the potential the market is creeping toward a bubble is “really a big, big problem that is being under-appreciated.” He pointed to a market driven not by actual worth, but by the Federal Reserve continuing to pump money into the system as well as “how far U.S. equities have diverged from the underlying economy.”
Former Fed Governor Robert Heller called the markets ”perilously close” to a bubble when speaking with CNBC. If the market doesn’t buck the historical trend, and stocks continue to rise, fears that investors are ignoring the true state of the market and economy will likely grow.
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