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Wall Street’s top strategists have been releasing their 2013 outlooks, and the sentiment has been overwhelmingly bullish. Barron’s recent survey of strategists yielded no one who expected stocks to fall in 2013.Of the strategists we follow, only Wells Fargo’s Gina Martin Adams expects stocks to be lower from here.
Jefferies’ Sean Darby just published his 2013 outlook for stocks, and not surprisingly, it’s bullish.
Here’s Darby’s call:
The Federal Reserve has opted for financial repression to liquidate public debt. Hence real interest rates will remain low for an extended period. We expect US equities to outperform US government bonds in 2013. Global growth is set for a period of extended weakness as the developed world undertakes a period of austerity. Deflationary forces are being offset by massive central bank balance sheet expansion. Much like the US yield curve which has flattened, US corporate profits are peaking as the economic recovery matures. We expect the US economy to grow modestly next year and the S&P 500 to rise by a modest double-digit gain of 11%, implying an index target around 1,565. Margins are likely to remain higher for longer. While fiscal and external shocks remain, US equities have become more closely aligned with corporate credit markets in the short term. Housing will continue to flourish but the surprise may come from changes in the US corporate tax code to encourage companies to invest. We continue to highlight the relative competitiveness of the US to other leading economies and highlight the positive shock from falling energy costs. We also recommend a high quality related investment strategy for 2013. Although growth disappointments may overshadow the market, it is changes in corporate bond spread that will be the main risk in 2013.