×

TIAA Investments sees stocks slipping 4% by year's end - here's why

This year's historic market rally may be running out of steam.

TIAA Investments' Brian Nick sees stocks ending the year below current levels. His S&P 500 Index target for the end of 2017 is 2400 — a four percent decline.

"That's been our target the entire year. When we came into the year I'd say we were cautiously optimistic," said the firm's chief investment strategist on Friday's "Trading Nation" this week.

"We ended up hitting that equity target of 2400 on March 1," he said.

Yet, he didn't adjust his year-end target even as stocks broke records. From March 1 until now, the S&P has soared six percent.

"We are going to see a leveling off in the trajectory of how fast these gains could come — especially given the fact that the price this year of the S&P 500 has grown faster than earnings have grown," he added.

It's a scenario that can't last forever, the investor said.

"We're already at the highest level for P/E [price earnings] ratios since the technology. Now they were a lot higher back then too," Nick said "If you're telling an investor to get into the market at 17 or 17 1/2 or almost 18 — their next five to ten year outlook is not going to be as good."

Despite his bearish case for the rest of this year, Nick predicts the bull market likely has a few years left.

"Look at our target for next year. It's 2600 for the end of 2018. So we're still thinking the market has legs," he said. "I don't think we'll get a year like this year where the total returns have been in the area of 13 percent if we keep seeing six to nine percent earnings growth."

The US may be positioned to see a considerably lower rate of return next year, but that doesn't mean other areas of the world won't rally. That's why Nick is urging clients to look aboard — citing higher odds for robust returns.

His top spots for investors are the euro zone, India and Latin America.

"Their long-term growth potential isn't as good as ours. But they're coming into the fourth quarter of this year and probably 2018 considerably cheaper looking than the United States," Nick said, who also cited those regions' growing economies and accommodating central bank policies.

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect