The Standard & Poor’s 500 Index will fall to 1,232 by March 31, marking the bottom of a “modest correction,” according to Birinyi Associates Inc., which cited data measuring average drops of at least 5 percent since 1945.
When the S&P 500 loses 5 percent during a rallying period, the decline lasts an average of 41 days and extends to 8.3 percent, according to a report by Cleve Rueckert, an analyst at Birinyi Associates. Since the S&P 500 peaked this year at 1,343.01 on Feb. 18, it has fallen 5.2 percent, paring gains since March 9, 2009, to 88 percent. The S&P 500 was up 18.51, or 1.45 percent, at 1297.71 in Monday afternoon trading.
“History suggests that the current decline will be short-lived, and most likely presents a buying opportunity,” the Westport, Connecticut-based research and money-management firm said in a report.
Thomas Lee, equity strategist at JPMorgan Chase & Co., and Mary Ann Bartels of Bank of America Corp. also said that U.S. equities are poised to climb. Birinyi was one of the first to tell clients to buy as the S&P 500 fell to its 12-year low in March 2009 and has held a bullish outlook since then, saying stocks are in the midst of a “multi-year” rally and may climb as high as 2,854 by 2013, based on past bull cycles.
While the average 5 percent decline leads to an 8.3 percent drop for the benchmark equity index, Birinyi said a correction forms 33 percent of the time and becoming a bear market is “even less likely,” according to the report. Slides that lead to bear markets have occurred in 10 percent of the cases. A correction is often defined as a 10 percent drop.
Laszlo Birinyi, the firm’s founder, said in December that the S&P 500 may climb to 1,333 in 2011. The firm said in its February report that may be conservative, as “2011 has gotten off to a positive start.” The index is forecast to rally to 1,400, according to the average projection of 13 strategists surveyed by Bloomberg.
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