Analysts at Denmark's Saxo Bank see tough times ahead for the markets and recommend that investors stick to bonds.
"The temporary factors supporting the recovery are fading and will likely reveal a much slower economy, a realization that is only just taking hold in the markets," Christian Blaabjerg, chief equity strategist at Saxo Bank in Copenhagen, said.
"Constraints to consumer spending will continue to feed back into the corporate sector through weak final demand. This will lead corporations to hire and invest more slowly while hoarding cash," Blaabjerg added.
"All this will unfold in a polarized political climate. Given this economic backdrop, we estimate a 10 percent probability of a V-shaped recovery, a 50 percent probability of a weak U-shaped recovery and a 40 percent probability of a double-dip scenario," he said.
Blaabjerg sees the S&P 500 ending the year at 1022 on a 12.8 times earnings multiple.
"Earnings will continue to be at risk as expense cutting and slow but increasing capacity utilization mask weak sales," he said.
Next year the index could see a rise to 1174 according to Blaabjerg, who cautioned that the chances of disappointment with that view remain high.
"Downside risks to the S&P 500 far outweigh the upside risks and despite the continued rally in Treasurys, we continue to reiterate our underweight to equities relative to Treasurys," he said
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Disclosure information was not available for Christian Blaabjerg or his company.