U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009.
The Standard & Poor’s 500 Index has rallied 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P
500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the
index gained another 93 percent in the next 2 1/2 years.
For all the concern about unemployment and manufacturing
growth, the best assets this year remain American companies
after unprecedented steps by the Federal Reserve to support
growth. Forecasts for a rebound in the U.S. economy and the
central bank’s pledge to keep interest rates near zero for years
convinced bulls the S&P 500 will extend gains. Bears say
political gridlock will drag down prices after monetary stimulus
The bull market will last another year as individuals
regain confidence and return to equities after withdrawing money
since 2007, according to Laszlo Birinyi, the president of
Birinyi Associates Inc. in Westport, Connecticut. Investors have
pulled about $100 billion from U.S. stock funds this year and
added $250 billion to bond funds, according to data from the
Investment Company Institute in Washington.
“I don’t think you’ve seen the signs of a frothy, toppy
market,” Birinyi, who traded equities at Salomon Brothers Inc.
in the 1980s, said in an Oct. 17 phone interview. “People are
realizing that the stock market is not all that bad. It’s been
telling us that the economy and companies are in better shape
than people think.”
Wall Street strategists tracked by Bloomberg predict the
S&P 500 may surpass its all-time high next year. The benchmark
may end 2013 at 1,585, according to the median forecast of five
analysts polled by Bloomberg News, 1.3 percent higher than a
record in October 2007.