Steve Leuthold, the veteran money manager who produced big returns last year going short, has now turned bullish — big time.
He predicts that Standard & Poor’s 500 Index, already up 27 percent from its March 9 low, will gain another 30 percent from current levels. That would put the S&P at 1,100 by year-end.
On a price-earnings basis, based on five-year average earnings, stocks were in the bottom 10 percent of historical valuations at the March lows, Leuthold tells Bloomberg.
“Other than 1974, that market was about as cheap as I’ve seen in my 45 years in this business,” says the founder of Leuthold Weeden Capital Management.
He sees larger stocks as more undervalued than small stocks.
And it’s not just low valuations that will push the market higher, Leuthold maintains.
“We’re probably going to see the economy start turning upward, not now but toward the end of the year,” he says.
“The market is a leading economic indicator, so the time clock is about right for the market to turn up.”
Leuthold recommends the technology and biotechnology sectors as a play on the economy’s rebound and gold as a hedge against the threat of inflation.
He isn’t the only bear converted into bull. Investment guru Marc Faber says that after a correction downward, the S&P 500 can reach 1,000 by July.
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