Federated Investors sees S&P 500 at 2,500 in two years
The S&P 500 could hit 2,500 within the next 18 months to two years, according to Barron’s report on Sunday, citing its interview with Stephen Auth, chief investment officer, equities at Federated Investors.
A robust U.S. economy growing at an annual rate of 3.5 percent to 4.0 percent should help the S&P 500 achieve the 2,500 milestone, about 30 percent higher than its current level of around 1,955 points.
“Market valuations depend on growth, bond rates and perceptions of risk, and all three of those are going in the direction that actually expands the price/earnings multiple,” Auth said.
“At the same time, earnings are expanding, and that’s a recipe for another leg up in the market.”
He cited the improving trend in the labor market as well as growth in the underlying private economy, which has been growing at 3 percent over the last three years.
Auth also said he expects the energy sector to create a “manufacturing renaissance” because of lower costs.
He estimated that equities are trading at a 50 percent discount to bonds.
Auth noted that there are many near-term forces keeping bond yields down and those factors are bullish for equities.
Source: Reuters
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