New Year’s Prediction #5: S&P Will Close at Over 1,420

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I hope you enjoyed my other four New Year’s predictions, including New Year’s Prediction #4: Retail, The Hottest Sector of 2012. But my final prediction may be my boldest yet:

I predict that we’ll end 2012 with the S&P — our key benchmark — closing at over 1,420. From late December’s 1,200 level, that would represent a solid 20% rise. That same percentage jump in the other indexes would put the Dow over 14,200 and the NASDAQ north of 3,000.

Surprised?  On the surface, these may seem like lofty numbers. But let me put it into context for you.  Let’s flash back to 1980.  It was an election year, like 2012, and the S&P rallied 25.8% from Jan. 1 to Dec. 31. It wasn’t a straight ride north for the market, but it was a very profitable year.

Today, unlike in 1980, a wide disparity exists between reported earnings and stock prices. Although earnings experienced double-digit growth in every quarter in 2011, stock prices didn’t move in lockstep to reflect that growth. The reckoning of this disparity will come to pass in 2012 as earnings continue to rise, as the crisis of confidence that has plagued the market is lifted and as investors get excited about the U.S. economic recovery. That’s why we could very well see the 2012 market meet or beat its 1980 gains.

Best of all, I’m going to see my blue-chip stocks leading the market higher. I expect these stocks, which includes heavy-hitters such as McDonald’s (NYSE:MCD) and Reynolds American (NYSE:RAI), to outpace their expected market gains.

My blue-chip portfolio will be fueled by strong earnings and powerful buying pressure that should bring double the profits of what I could make by parking my money in a generic index fund. And remember, investing in blue-chip stocks means you’re likely to have solid dividend yields, which means you get the added safety of steady income.

The bottom line is that 2012 is shaping up to be a very good year for investors who can see what’s coming and know how to pick the right stocks for maximum profits.


Article printed from InvestorPlace Media, https://investorplace.com/2012/01/new-years-market-close-1420-mcd-rai-2012/.

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