Tags: Lee | S&P 500 | 2325 | PE

Tom Lee: S&P 500 Will Hit 2,325 By End of 2015 Amid Strong Earnings

By    |   Friday, 19 December 2014 09:45 AM

The S&P 500 index has jumped 4.5 percent in the past two days, its best performance since 2011. And Tom Lee, head of research at Fundstrat Global Advisors, thinks the party will keep on rolling.

Indeed, he expects the index to reach 2,325 by the end of next year. That would represent a 13 percent gain from Thursday's close of 2,061.23

"We think markets will continue to surprise to the upside, very similar to the story for the past six years," Lee told CNBC. "People think next year will be a low return year, because we have disinflation, because of lower oil prices and the problems in Europe and China."

But Lee, of course, sees things differently.

"That's what consensus is, it's either going to be better or worse, and we think it's going to be better," he explained.

"What we're picturing is that earnings growth is around 7 percent or better, and we see the P/E [price-earnings ratio] expand," he said. P/E ratios may already be high, but they will keep rising until a recession hits, Lee said.

"If you look at every bull market that's lasted at least four years P/Es expand more than one turn a year until the bull market peaks."

The S&P 500's trailing P/E ratio totaled 18.66 Friday, up from 18.41 a year ago, according to Birinyi Associates.

Others are turning bullish on stocks too.

"There's no reason why the S&P 500 cannot continue to chug higher," Jonathan Aldrich-Blake, a U.S. equity fund manager at Ashburton Investments, told Bloomberg. "The U.S. economy is one of the safest bets in the world, and the Fed coming out with a dovish tone [Wednesday] just gives investors the confidence they need."

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The S&P 500 index has jumped 4.5 percent in the past two days, its best performance since 2011. And Tom Lee, head of research at Fundstrat Global Advisors, thinks the party will keep on rolling.
Lee, S&P 500, 2325, PE
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2014-45-19
Friday, 19 December 2014 09:45 AM
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