US equities forecast to advance as recovery grows
Analysts say Wall Street will ride strength of economic recovery, with the S&P 500 Index targeted to end the year at a record high
The same equity analysts who lowered second-quarter profit growth predictions for firms in the United States to almost nothing for this year are raising price forecasts, convinced the economy is growing fast enough to lure more investors and boost valuations.
At the same time, share-price targets are rising at the fastest rate in two years.
The S&P 500, which closed at 1,631.89 points on Friday, will increase 8.9 per cent to a record 1,777.91 should the forecasts prove accurate.
Bulls say expectations for higher valuations show analysts share Federal Reserve chairman Ben Bernanke's view that the economy may gather enough momentum to expand on its own. Getting to their target would raise the index's earnings multiple to 16.4, still about 12 per cent lower than its 25-year average.
Bears say price appreciation without profit gains shows the five-year bull market is fading and declines are inevitable.
Second-quarter earnings season began yesterday.