The secular bull market remains strong, making the case for staying constructive on stocks, JPMorgan's chief investment strategist,Tom Lee, said Friday.
"The conditions that were supporting a rise in the first six weeks [of the fourth quarter] are still in place into year-end," he said. "And we know investors usually position for the year ahead anyway, so we don't see the market stalling here. That's why we raised our price target."
Lee, who previously had a 1,775 year-end target for the S&P 500, now expects the index to close out 2013 at 1,825. His call was among the most bullish on Wall Street, with Barclays forecasting 1,800 at year-end, Goldman Sachs at 1,750 and Citigroup at 1,650.
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On CNBC's "Halftime Report," Lee said that it wasn't exactly a coincidence that the raised price target came after Janet Yellen, the nominee to head the Federal Reserve, made comments supportive of continued bond buying before the Senate Banking Committee.
The three reasons that led to his bullish position, Lee said, were: Economic momentum, an accommodative Fed that was not likely to surprise negatively and relative value in the stock market.
"It's very supportive," he added.
Heading into 2014, Lee's top three sector picks were materials, financials and technology.
"If you take any sector, there's been some bifurcation, right? Because the things that have visible growth, or secular growth, have seen their multiples explode. And those are hard stocks to want to buy and put fresh money into," he said.
"But when you look at the rest of tech—and I'd argue large-cap tech, almost as a category falls into this—you're getting double-digit free-cash yield, top-line growth, you know, 6 percent, and you're paying a 12, 13, in some cases even a 9 P/E for them, I think those are real candidates for re-rate next year. Plus, you've got the earnings kicker if global earnings pick up."
Lee said that Cisco's big miss in its third-quarter earnings report raised some secular questions about cloud versus legacy technology, but he added that valuation still played a role.
"A new, fresh set of eyes are going to look at this group and say, 'You know what? I think I may get paid to wait, just like I got paid to buy pharma three years ago,' " he said.