J.P. Morgan Raises ‘10 Target on S&P to 1300

J.P. Morgan Raises ‘10 Target on S&P to 1300

  • Posted Friday, December 11, 2009 -
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Associated Press

J.P. Morgan analysts upped their year-end target for the S&P 500-stock index to 1300 by the end of next year, citing the chances of a better-than-expected economic recovery. The analysts cite a number of potential catalysts that could give the S&P a bit of extra oomph:

Payrolls turn positive consistently, likely in 1Q10; US home prices bottom in 1Q10; Credit availability begins to improve for consumers and small-business; Pent-up demand strengthens demand for housing (via starts), automobile sales.In other words, as 2010 progresses, the U.S. gets back to business.

J.P. Morgan's analysts are obviously bullish. But the gorilla in the room for the financial markets is the lack of visibility as how the investors will react when the Federal Reserve eventually removes its support for markets next year. J.P. Morgan analysts note that they expect a Fed rate hike sometime in the first half of 2011.

But before a rate hike happens, the Fed has laid out a plan to complete $1.25 trillion in mortgage-backed-securities purchases by the end of March. The Fed has already completed its plan to purchase $300 billion of Treasury securities.

The Fed's extrication of itself from some of the extraordinary programs it put in place to try to deal with the financial crisis is one of the reasons why analysts at Barclays Capital aren't as optimistic about the S&P as their counterparts at J.P. Morgan. "We think 10 will follow a pattern quite similar to 04, when stocks spent the first half of the year anticipating the end of the easiest monetary policy in decades. We believe that by the time the Fed actually raises rates, the market adjustment will largely be complete and equities will post positive returns in 2H10," they wrote in a research note Wednesday. They have a full year, 2010 target on the S&P of 1120, much less optimistic than J.P. Morgan's 1300.

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