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Analyst Sees Record Highs for Dow and S&P

Tobias Levkovich, chief U.S. equity strategist for Citigroup, told CNBC’s “Street Signs” that he believes the Dow Jones Industrial Average will hit 15,500 within the next 12 months, and the S&P 500 will rise to 1725.

Market sentiment, valuation and earnings expectations suggest the rally will continue, he said, though he thinks some stock segments will fare better than others: “We think it’s going to shift more toward the large caps,” Levkovich said.

Yet many investors tend to be overly cautious, a view Levkovich said is unwarranted.

“Let’s go back to the subprime period, where we were deeply worried about contagion from the subprime markets,” he said. “That didn’t cause the type of fear a lot of investors worried about back in February and March.”

Levkovich said money is cheap, encouraging buyouts that boost the market. And he's frustrated by constant chatter about a “private equity bubble” -- he said private equity accounts for about 25% of buyouts, while strategic buyers handle the balance.