The economy is highly unlikely to re-enter recession and that means the stock market will keep moving higher, though not as much as previously expected, Goldman Sachs analyst Abby Joseph Cohen said.
While offering the latest in a series of bullish projections for the market, Cohen's outlook of a 1,200 level on the Standard & Poor's 500 by year's end represents a pullback from some of her earlier calls. Cohen heads Goldman's Global Markets Institute.
In previous CNBC interviews, Cohen's forecast rested around the 1,250 to 1,300 rangefor the broad index. She said economic growth of about 1.5 percent in gross domestic product could limit the market's moves.
"Goldman Sachs for a long time has had one of the lowest economic forecasts, well below consensus. Even so, we think the scenario that's priced into the stock market is not quite what is likely to unfold," she said. "If you agree, for example, that a recession will be avoided, we think the S&P 500 is underpriced not just based on 2010 but also a 2011 outlook."
The S&P's current price-to-earnings ratio of about 13 is below the historical standard of 17 or 18, suggesting that stocks are undervalued, she said.
"Since the end of the last recession at the end of 2002 we see that share prices are up about 30 percent but S&P profits are up about 75 percent," she said.
Cohen's team at Goldman Sachs also sees valuation opportunities in global stocks.
"We think think the probability of a double-dip has done down significantly. You can never rule anything out," she said. "I think we've all learned to be very humble as economic forecasters in recent years, but we think the deceleration is related to a few factors."
Among those she cited are the end of inventory rebuilding and the fading of government fiscal stimulus. But she said those factors are offset somewhat by gains in equipment spending, industrial production and exports.