Tags: O’Shaughnessy | stocks | rise

Money Manager O’Shaughnessy: Stocks Will Soar 86 Percent by 2020

By    |   Thursday, 05 April 2012 07:43 AM

Stocks are headed higher through the rest of this decade, as they work overtime to erase the losses they’ve incurred over the past 12 years, says Jim O'Shaughnessy, founder of O'Shaughnessy Asset Management.

He sees the Standard & Poor’s 500 Index reaching at least 2,600 by 2020, which would represent an 86 percent gain from current levels.

Stocks performed so poorly in the 2000-2009 period that just to match the worst 20 years in stock market history — 1929-49 — stocks would need to rise at a compounded annual rate of almost 7 percent through 2019, O’Shaughnessy tells Yahoo.

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“For investors now, we’re saying you’re already sitting pretty good in equities, because of the damage of the last 12 years.”

And with after-inflation yields on 10-year Treasuries standing at essentially zero, investors will flee the bond market, O’Shaughnessy says.

"If investors can achieve 4 percent returns after inflation [in stocks], what are they doing in Treasurys?” he asks. “As investors see that is the case, they will start shifting money to the equity markets.”

But with the S&P 500 already having jumped 11 percent this year, some experts say gains will be limited in the short term.

“Guess what, expectations are now much higher,” Mark Freeman, chief investment officer at Westwood Holdings, tells Bloomberg.

“It’s going to take more than just good data now to take the market higher.”

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