Tags: Stovall | stocks | surge

Stovall: Stocks Could Surge 17 Percent in Next Year

By Dan Weil   |   Thursday, 03 Nov 2011 07:58 AM

The rally that has sent the Standard & Poor’s 500 Index up 13 percent over the past month may well continue, pushing the index up another 17 percent over the next year, says Sam Stovall, chief equity strategist at S&P Capital IQ.

That assumes that the 2011 closing low of 1,099 for the S&P 500 remains the nadir of this cycle. That level represented an almost 20 percent drop from the year’s high.

Stovall tells CNBC he looked at the eight periods after similar “near-miss corrections or baby bear markets,” as he calls them.

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He found that three months after the low, the S&P 500 rebounded by an average of about 13 percent, six months after by 23 percent, and 12 months after by 32 percent.

(Associated Press photo)
Calculating from current levels, that would leave the S&P about unchanged in two months, push it up 9 percent in five months, and 17 percent in 11 months.

“That implies basically you would probably want to take advantage of some of these price weaknesses, because if you’re going to hold for 12 months, that’s a good opportunity,” Stovall says.

While he says a rally would likely be led by cyclical stocks — technology, consumer discretionary and industrial shares — Richard Bernstein, CEO of Richard Bernstein Advisors, is bullish on defensive stocks, Bloomberg reports.

Whether we’re in a recession or just a slowdown, that’s the way to go, Bernstein writes in a report.

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