Steve Leuthold, the money manager who made waves several months ago by turning bullish on stocks, is staying that way — for the short term.
The Standard & Poor’s 500 Index could rise 25 percent, to 1,350, by the middle of next year, but then comes a drop, says the chief investment officer of Leuthold Weeden Capital Management.
“I think we’re setting up for a really good market in November and December. . . where you’re getting kind of a capitulation on the part of people who have been cautious,” Leuthold told Bloomberg.
He has a 1,200 year-end target for the S&P 500. While stocks would be approaching overvalued territory there, he sees an additional rise to 1,300 or 1,350 before the decline.
“That puts us up at pretty high (price-earnings) multiples. Undoubtedly the performance in 2009 will be better than 2010,” Leuthold said.
While he declined to predict how far stocks will drop from their peaks next year, Leuthold did say that much depends on what the government does next.
“We’re getting up to the point where there’s going to be expectations on bringing the budget deficit down, on bringing in some of this huge amount of excess liquidity.”
“If that doesn’t happen, I think we could have some trouble ahead for the last half of the year.”
Some experts think the rally can last even longer.
Economist Brian Wesbury wrote in Forbes that the Federal Reserve’s easy money policy can buoy stocks well into 2011 before Fed tightening in 2012 pulls them back down.
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