Stocks will rise 6.5 percent this year as the bull market that began six years ago extends gains on economic growth, Wall Street's most upbeat analyst of 2014 said.
The S&P 500 will end the year at 2,375, up from the December 31’s closing level of 2,058.90, according to an estimate by Barry Bannister, head strategist at Stifel Nicolaus & Co. In August, he went from being the most bearish Wall Street forecaster to the most bullish, increasing his year-end target for the S&P 500 by 28 percent to 2,300 from 1,800 previously.
Stocks this year will be “helped by low interest rates, cheap energy and policy accommodation globally that results in economic traction along with low inflation,” he said. The gains will result from a combination of rising corporate profits and greater investor willingness to pay for those earnings.
Like last year, Bannister's market forecast is starting off on the conservative side at 6.5 percent. Strategists on average forecast that the S&P 500 will gain 8.2 percent this year, according to The Wall Street Journal.
The dollar’s value will affect which industries show the most gains, Bannister said in a January 5 report obtained by MoneyNews. A stronger dollar will help healthcare, consumer technology, staples and consumer technology.
But the dollar will weaken as the Federal Reserve raises rates later than current Wall Street consensus forecast, he said, which will help segments of the utilities, financials, materials, industrials and energy industries. Investors expected the central bank to raise rates by mid-2015, as measured by 30-Day Fed Funds futures
“As we enter 2015 we watch what we believe to be an overbought, complacent level of dollar bullishness for a top, causing dollar weakness to bounce,” he said. “We believe the cause of the oil collapse was dollar strength due to poor foreign GDP vis-à-vis the U.S., combined with post-Arab Spring oil output recovery.”
To help the housing market, the Federal Reserve needs to be patient in raising interest rates, Bannister said, in accordance with the central bank’s December policy statement that said “it can be patient in beginning to normalize the stance of monetary policy.”
“Personal income must grow, and not be clipped by a hasty Fed exit,” Bannister said. “Or we see minimal housing recovery.”
The oil price slide, which has totaled 55 percent since late June, could wreak havoc on housing markets in the areas where oil is being produced by hydraulic fracturing (fracking), MarketWatch reports
U.S. home prices rose at an annual pace of 5.5 percent in November, according to CoreLogic. But it says that pace could fall to 4.6 percent by November — the lowest rate since mid-2012 — thanks to falling energy prices in states such as Texas and North Dakota.
"Three of the top four states with the highest [home] price appreciation are energy intensive and had been benefitting from the energy boom, which is currently receding as oil prices trend downward," Sam Khater, deputy chief economist at CoreLogic, tells the news service.
"These states — Texas, Colorado and North Dakota — may see some downward pressure on prices in 2015."
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