Get your money ready for a big S&P 500 rally
June 4, 2014, 6:45 PM ET
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The bulls are back in town — and there’s a growing sense that they’re staying awhile.

The S&P 500 SPX +0.19% logged its 16th record close for 2014 on Wednesday, leaving U.S. market bears verging on their 19th nervous breakdown.


Bloomberg
Bulls got another big boost after the close Wednesday from S&P Capital IQ. The research firm’s Investment Policy Committee — which has been upbeat on U.S. stocks — raised its 12-month target for the S&P 500 to 2100 from 1985 — a 9% price increase. The model portfolio allocation of 50% U.S. stocks, 15% international stocks, 25% bonds, and 10% cash was left unchanged.

S&P Capital IQ consensus estimates see operating EPS increasing 12.4% from 2014′s second quarter to the comparable quarter in 2015. As for inflation fears, they’re overblown, the committee said; it expects inflation to run at or slightly below the recent 2.0% year-over-year increase in headline CPI.

This sunny economic and market outlook allows the possibility of a slight P/E contraction to below 17-times earnings as the U.S. bull market continues for a sixth year. Still, S&P Capital IQ said the market’s current fundamentals “support a high single-digit price appreciation for U.S equities in the coming year.”

Technical traders, take note: S&P Capital IQ says that while the trend for the S&P 500 remains bullish, the index is unlikely to make any meaningful gains until the other indices establish themselves above current resistance levels. For the S&P 500 itself, traders can look for support on a pullback to a range between 1876 and 1850, which was the January high this year, S&P Capital IQ noted.

S&P Capital IQ added: “While these levels of support remain intact, and the ascending trend channel remains in force, we continue to be bullish and anticipate further gains.”

Skeptical? Check out Wall Street veteran Sam Eisenstadt’s latest six-month forecast, which sees the S&P 500 hitting 2100 by the end of November.

– Jonathan Burton