Sam Stovall, chief investment strategist for Standard & Poor's, thinks that maybe 2005 won't be so bad. Some of his considerations are as follows:
Even though rising interest rates, decelerating corporate earnings gains, and the aging of this bull market may cause equity returns to fall short of their long-term averages, S&P's Investment Policy Committee does not believe the U.S. equity markets are likely to end their bull runs in the near term.
Why? Global economies are projected to grow between 2% and 7% in 2005, with the U.S. projected to post a 3.7% advance in real GDP. Corporate cash levels remain very high, in our opinion, with more than $600 billion on the books of companies in the S&P 500. In addition, it's estimated that corporations will repatriate between $100 billion to $200 billion in foreign earnings. This capital will likely induce managements to repurchase shares, raise dividend payouts, increase acquisition activity, or spur additional R&D investment.
His end-2005 target for the S&P 500 is 1300, which provides a 7.3 percent full-year price appreciation.