As stocks hit record highs on a daily basis, investors are wondering how high
the market can go before it cools off.
On Tuesday, the Dow Jones industrial average closed above 15,000 for the first
time in its 117-year history. The Standard & Poor's 500, a large-company stock
index, and the Russell 2000, an index of small stocks, also closed at fresh
records in what's been a stellar year so far for stocks: The Dow is up nearly
15%.
A check-in with the most bullish suggests stocks can keep climbing before
succumbing to a sizable pullback. Optimists' current projections suggest stocks
can rise another 8% to 17% by year's end, and shoot up as much as 25% sometime
in 2014.
One mega-bull, Craig Johnson, strategist at Piper Jaffray, is sticking to his
call, which he unveiled last summer, for the S&P 500 to hit 1700 this year, or a
gain of roughly 5% from Tuesday's record close of 1625.96. Johnson is betting
that the uptrend will continue well into 2014, with the benchmark index nearing
a target level of 2000, or 23% higher than current levels.
"The bottom line," he says, "is we are bullish and have been since August 2012."
One skeptic sees things differently. Gina Martin Adams of Wells Fargo, the most
bearish Wall Street strategist, this week reiterated her year-end S&P 500 target
of 1390, a drop of more than 14% from here.
Why does Johnson think a market already hitting records, despite a so-so
economy, good but not great corporate earnings and slowing growth around the
world, can keep surprising to the upside? He says the market's decisive breakout
above 1600 on Friday and prior market peaks in 2007 and 2000 signal that the
bear market, which began in 2000 with the bursting of the tech-stock bubble and
intensified during the 2008 financial crisis, ended in March 2009.
"The 1600 breakout," he says, "diminishes the bear's argument."
Johnson isn't the only bull saying stocks are the place to be. This week Laszlo
Birinyi, of Birinyi Associates, told clients the S&P 500 could hit 1900 this
year, a nearly 17% jump. It's doable, he says, if stocks continue to carve out
the same upward chart pattern that occurred during long-term bulls that began in
1982 and 1990. "Our analysis continues to point to higher prices," Birinyi wrote
in his report "S&P 1600: Now what?"
Other bulls include Tony Dwyer of Canaccord, whose 1760 year-end target, or up
8% more, is the highest of all the strategists at major Wall Street firms. The
market has already topped the average year-end 1601 price target of 17
strategists tracked by Bloomberg News.
Jeremy Siegel, a finance professor at the Wharton School, also predicts stocks
will keep rallying. Citing attractive prices relative to corporate earnings,
super-low interest rates and nearly $10 trillion in cash on the sidelines that
he says will eventually migrate into stocks, he argues the Dow could hit 17,000
this year. "I still think this bull market is young," Siegel says. "It has legs.
I don't even think the market is fairly valued yet."
