 "S&P 500 may touch 1,430 by 2012 end: JP Morgan")
JP Morgan Securities said the S&P 5OO may touch 1,430 by the end of next year, a level the index had last touched in May 2008, before the financial crisis plunged the US economy into recession.
The brokerage expects the euro crisis to abate by the second half of 2012 with Europe potentially exiting recession by mid-year. It also believes that the US housing sector should see a further advance in its recovery in 2012.
JP Morgan also believes that China’s economy will likely avoid a hard landing in 2012.
[caption id=“attachment_154917” align=“alignleft” width=“380” caption=“JP Morgan also believes that China’s economy will likely avoid a hard landing in 2012. Reuters”]
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Additionally, the brokerage believes the 2012 US election cycle will be positive for equities. Stocks have historically done well when an incumbent has had low approval ratings going into an election year, it said.
In addition, JP Morgan said its Fixed Income teams see meaningful positive returns in their markets in 2012.
The brokerage also expects companies’ net profit margins to improve in 2012 and anticipates corporates to ramp up total cash return by as much as $250 billion in 2012.
“In our view, the framework for 2012 may look a bit like 2009-emergence from a financial crisis and the potential for an acceleration of the business cycle (driven by Europe exiting recession and China easing),” JP Morgan’s chief US equity strategist Thomas Lee wrote in a note.
As such, JP Morgan sees cyclical - materials, industrials, discretionary, technology – and financial stocks outperforming, and chose financial stocks as its top pick for 2012.
Small caps are likely to outperform large caps given the stronger growth and declining volatility, and are likely to reach new all-time highs in 2012, the brokerage said.
The S&P 500 index was down 2.1 per cent at 1228.81 on Monday afternoon - 200 points below JP Morgan’s 2012 year-end target.
Reuters