It's been an extraordinary year on Wall Street . But, surprisingly, the U.S. stock market's nearly 30% gain is more ordinary than investors might think. In the past 116 years, U.S. stocks have posted annual gains of 20% to 30% in 20 of those years. The market has posted gains in excess of 30% a year 14 times. That means stocks have posted gains of 20% or more roughly one out of every three years, statistics compiled by Tom Lee , chief U.S. equity strategist at JPMorgan Chase , show. More important, stocks tend to perform well the year after the market posts gains of more than 20%. In the 20 instances since 1897 when the U.S. stock market has posted gains of 20% to 30%, it has posted average gains of 7.7% the following year and finished higher 70% of the time. What's more, market valuation, when measured by the price-to-earnings ratio based on expected earnings in the next 12 months, has been close to its current P-E ratio of 14.8, according to Lee's data. So not only are strong gains one year usually followed by continued gains the next year, history suggests that today's market, despite a huge run-up in 2013, isn't grossly overvalued. In short, if history is a guide, it's not hard to make a bullish case for 2014. "History," Lee concludes in his 2014 outlook report, "suggests a decent follow-through (year)." Lee's year-end 2014 price target for the S&P 500 is 2075, roughly 13% higher than Thursday's close.
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