Sam Stovall Sees 1400 S&P500 in 2012

JC Parets
December 9, 2011

Here is nice headline to take us into the weekend. In case you didn't know, Sam Stovall is the the real deal technician. I know he's always talking earnings multiples and GDP protections, but don't let him fool you - the man knows his Technical Analysis.

He's looking for 1400 on the S&P500 next year, which would take us to those key support & resistance levels from 2007-2008. After breaking support in the early days of 2008, polarity came into the picture turning that 1400 area into major resistance in May of that year:

From AdvisorOne:

Sam Stovall, chief equity strategist at S&P Capital IQ, suggested Friday, with the appropriate caveats, that the S&P 500 may well return in the mid-to-upper teens in 2012. In fact, S&P Capital IQ’s Investment Policy Committee forecasts that the S&P will end 2012 at 1,400, or a 13.5% advance over the Dec. 8, 2011 close of 1,234.

Stovall notes that “history indicates, but does not guarantee, that the S&P 500 return in 2012 will likely be positive,” and goes on to note that since 1900, the median difference in annual price performances for the S&P 500 was 17 percentage points. But using the median 12-month forecasts from each of the Investment Policy Committee members, the group suggests a 15 percentage point change from 2011’s YTD result.

The key factors cited by the committee:

  • The S&P 500 is likely to “catch its second wind during the upcoming fourth year of this bull market, but this advance may be tempered by the ineffectiveness of a split Congress.”
  • A near 3% projected growth in global real GDP will be paced by gains in emerging economies, “while pressured by a recession in Europe and half-speed (albeit modestly accelerating) recovery in the U.S."
  • A recession is expected in the eurozone in the first half of the year, followed by a modest recovery, while Chinese GDP is expected to grow 8.0% to 8.5%.
  • S&P 500 operating earnings are projected to grow 8.5%, down from 16% in 2011, paced by cost-cutting, share repurchases and improving revenue growth.
  • While the S&P 500 “should advance to the 1,350 to 1,370 region, and possibly 1,400, by the first quarter of 2012,” there could be a 10% to 15% correction in the second and third quarters.
  • The recommended asset allocation for a moderate investor would be 45% U.S. equities/15% foreign equities/25% bonds and 15% cash. The suggested allocation to bonds is below S&P’s standard 30% exposure, while the cash allocation is up from its normal 10% recommendation.
  • As for sectors, S&P suggests a cyclical bias in which Consumer Discretionary, Consumer Staples and Information Technology is overweighted, while underweighting Financials and Telecommunications Services.

(Stovall will appear on a Dec. 14, 2011 free web seminar sponsored by S&P Capital IQ: ETF Outlook: Equities, Biotech, and Fund Launches, in which he will discuss the equity markets in 2012 and favorable ETF plays.)

Source:

Sam Stovall Sees a 13% Advance in S&P500 for 2012 (AdvisorOne)

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