BMO Private Bank CIO Says S&P 500 Will Reach 2140 Next Year

By Andrew Rickard | August 28 2014 01:05PM

Jack Ablin, the chief investment officer at BMO Private Bank predicts that, having reached the 2,000 mark for the first time on August 26, the Standard & Poor's 500 index (S&P 500) is poised to hit 2,140 within the next year.

"Over the next 12 months, we anticipate a 5% to 7% gain for the S&P 500, fueled by modest earnings and revenue growth," says Mr. Ablin. "Our favourite sectors are financials and health care, because of their relatively cheap valuation when gauged against the other sector groups."

The report points out that the S&P 500 has already risen nearly 200% from its low point in March of 2009, registering a 22% annual compounded return since that time.

Although the US Federal Reserve is poised to begin raising interest rates, Ablin says that in the past equities have still advanced when rates increased, particularly in response to stronger economic growth and modest inflation. The risks to be faced are rather the possibility of an extended slowdown in economic growth abroad, both in China and the European Union.

"A substantial rise in unanticipated inflation could also shift investors' attention away from equities toward real assets, like gold and other commodities," reads the report. "While we're optimistic, certain imbalances, like debt levels, household income growth and labor participation need to be addressed by both the public and private sectors," concludes Mr. Ablin.