The Standard & Poor’s 500 Index may reach 1,350 points by the end of 2010 or the first half of 2011 as the U.S. economy emerges from recession, Legg Mason Capital Management Inc. forecast in a statement.
Growth won’t be soft but will see a clear acceleration, followed by a period of stability, and “massive” quantities of liquidity may feed the market rebound, Legg Mason said.
The S&P 500 has surged 11 percent since July 10 after companies including Caterpillar Inc. and 3M Co. reported earnings that beat forecasts and gains in new and existing home sales added to signs the recession is easing. The rally left the S&P 500 trading at 16.25 times its companies’ profits at the end of last week, according to data compiled by Bloomberg.
“The improvement of fundamentals, in addition to the abundance of liquidity should limit market corrections to a range of -10 to -15 percent,” wrote Robert Hagstrom, a fund manager at Legg Mason.
Economic data must show improvements for the stock market to continue gains,
and that should happen in the second half of the year, Legg Mason wrote.
I guess they're counting on the same type of liquidity that inflated housing. Perhaps they should distinguish between Nominal S&P values and Real Values. In either case, bookmark this post and revisit it in 1.5 years.