The U.S. economic rebound may be slowing, but investment strategists such as JPMorgan Chase’s Tom Lee still see stocks rising for the rest of the year.
Strong earnings will fuel the gains, they say. Lee sees stocks climbing 16 percent for the rest of the year. The Standard & Poor’s 500 Index has appreciated 1.2 percent so far this year – to about 1,100.
A Bloomberg survey of 12 major securities firms shows an average forecast for a 10 percent increase, pushing the S&P 500 to about 1,242.
Stocks are attractive on a price-earnings basis, Lee tells Bloomberg. The S&P 500’s PE ratio stands at 15, which is 16 percent below its average since 1937 when adjusted for interest rates, he says.
Add that to forecasts for earnings growth of 35 percent this year and 16 percent in 2011, and you have a good recipe for a stock market rally, Lee says.
“Second-quarter results have been unequivocally strong,” he said.
“U.S. housing looks like it’s stabilizing. People will start to smell reflation and shift back to risk assets.”
Still, there remain experts worried that the economy is headed back to recession, taking stocks with it.
“Some of the fears of a double dip have abated, but people realize that it is not an insignificant possibility,” Russ Koesterich, an investment strategist at BlackRock, told The Wall Street Journal.
“And people are much more worried about deflation.”
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