September 6, 2012 – Tough as Teflon: The stock market has deflected lots of worrisome news this summer, and Wall Street strategists see more gains ahead. Beware the fiscal cliff.
Call the stock market’s swift 10% rise since the end of May a Teflon rally of sorts, because myriad worries on Wall Street — from the so-called fiscal cliff in the U.S. to Europe’s financial mess to turmoil in the Mideast — haven’t stuck, much less slowed the bull’s progress. Instead, stocks have marched gamely higher, as ultra-low interest rates have burnished risk assets’ attraction and propelled investors to seek higher returns.
The market’s spirited advance not only has delighted investors, but vindicated the mostly bullish 2012 forecasts of 10 prominent market strategists Barron’s surveyed last December. The Standard & Poor’s 500 is up 12% year-to-date, to 1406, and most of these seers still are bullish, even though stocks are more expensive now, and worries about the economic backdrop remain. Pictured below, the Dow Jones Industrial Average (DJIA) monthly open, high, low, close chart.
The mean year-end S&P forecast of the group’s seven optimists is 1446, which suggests stocks will rise 15% for the full year. John Praveen of Prudential leads the pack, with an S&P price target of 1480.
The bears, though fewer in number, also are filled with conviction. Barclay’s Barry Knapp sees the S&P falling to 1330 by year-end, while David Kostin of Goldman Sachs pegs fair value at 1250. Adam Parker of Morgan Stanley is the group’s “Ursa Major,” with a price target of 1167, based in part on his prediction that corporate profits will decline in 2013.
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(Credits: Narrative – Vito J. Rancanelli for Barron’s, Top Picture – Scott Pollack for Barron’s, DJIA Monthly Price Chart – Genesis Financial Technologies – Trade Navigator Gold)
The Master of Disaster