David Kostin, the bank’s chief U.S. equity strategist, recommends buying shares of companies that generate most of their revenue domestically.

The S&P 500 increased as data showed retail sales increased for a fourth consecutive month, a sign that American households are boosting spending as employment climbs.

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“The real issue to focus on is that rising interest rates are a reflection of a better economy,” Kostin said in a Bloomberg Television interview from New York. “The best strategy right now would be here, in the U.S., from now until the end of the year.”

U.S. equity strategists were too cautious on the rally at the beginning of the year, spurring forecasters from Goldman Sachs to Bank of America Corp. and Credit Suisse Group AG to boost year-end targets as the S&P 500 surged to highs.

Current predictions indicate the index will retreat 10 percent to 1,677 by December, the average from a survey of 17 strategists compiled by Bloomberg.

Kostin estimates the S&P 500 will finish 2013 at 1,750 and 2014 at 1,900. The gauge rose 0.3 percent to 1,694.16 at 4 p.m. New York time, bringing its advance this year to 19 percent.

Federal Open Market Committee policy makers have been debating the pace and timing of any cuts in the monetary stimulus that has helped propel the S&P 500 more than 150 percent from its bear-market low in 2009. The central bank has said economic data will determine any reduction in its $85 billion in monthly asset purchases.

The S&P 500 trades at 16.3 times reported operating earnings, near the highest level since May 2010. The valuation is still 16 percent below the average since 1998, data compiled by Bloomberg show.

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