Market Insider

A Flat Market in 2011 Could Mean a Rally This Year

Following last year’s pancake-flat finish for the S&P 500, most strategists agree that there is no other direction for markets than up in 2012.

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For 2012, strategists’ average S&P year-end target is 1,350, a 7 percent gain from the index’s close of 1,257 in 2011.

Markets will be higher this year,” said Sam Stovall, chief investment strategist at Standard & Poor’s. “This year, our target is 1,400—our belief is we could see about $107 of earnings and given about a 13.5 P/E, we could get there."

While strategists are not overlooking the fact that euro zone woes will continue to drive the market bus this year, they remain confident that the region’s leaders will come up with more solutions to handle the ongoing sovereign debt issues, helping soothe investor fears.

“Europe getting cleared up would be a catalyst, but no additional negative news coming out of Europe would also be a positive,” said Stovall.

Meanwhile, strategists also expect the economy to show a slow improvement, adding fuel to the rally.

“There will be pockets of opportunity,” said Bryan Piskorowski, managing director at Wells Fargo Advisors. “[We’ll] use that volatility, which will be prevalent in the first half, to readjust our portfolio.”

Piskorowski has a year-end price target of 1,325-1,375.

However, not every strategist sees a silver lining for 2012.

Adam Parker, chief U.S. equity strategist at Morgan Stanley remained a lone voice, setting his year-end target at 1,167, a 7 percent downside, citing decelerating global GDP, weak earnings and rising dollar as the main headwinds.

“The profits we’ve seen and the guidance we’ve seen from companies in December have been weaker across [sectors],” explained Parker. “That means April’s guidance during the January earnings season will be disappointing.”

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