The first half of 2012 "will be difficult," both in Europe and in the U.S., Abby Joseph Cohen, Goldman Sachs senior investment strategist, told CNBC Monday. She also expects that U.S. fiscal policy will get tighter.
However, "things will start to look better in the second half" of next year, the long-time bull said in her latest forecast.
Stocks will stay undervalued until "confidence is rebuilt," Cohen said.
"There's still many problems that need to be resolved. Although we think there is not a global recession in 2012, by many measures there are already several countries in Europe already in recession," she said.
"Whether it's a year from now [or] a few quarters from now, interest rates most likely will be on the way up," Cohen said, so long-term investors, including pension plans, should be focusing on equities and commodities.
"Valuations are already quite appealing," she said, and stocks have been "pricing in this gloomy economic and profit scenario."
It's been a tough year for mutual fund managers, many of whom have underperformed their benchmarks, she said. In core growth funds, more than 70 percent to 80 percent of fund managers underperformed, according to Cohen.
That suggests the "relative valuation gaps" between various sectors, stocks, and markets "are now widening, and that could give good opportunity for careful portfolio managers in 2012."
Despite her bullishness on the U.S. economy, she wouldn't give a definite answer on whether she believed the U.S. would be her "market of choice" 10 to 20 years from now.
"It depends on whether policymakers take advantage of our strengths here and enhance them," she said, especially on education.