Stocks lose allure with highest valuation to bonds since ’11

Economic Growth

S&P 500 profits will expand 9.5% in 2014, up from last year’s 5.1%, according to analyst estimates compiled by Bloomberg. Improving economies around the world will also help push up stock prices, Ward said. Economists forecast the U.S., Japan and the euro area will all grow this year, the first time all three have expanded since 2010, data compiled by Bloomberg show.

The Fed, which has held its benchmark lending rate at zero since December 2008, said on Dec. 18, 2013 that it would cut its monthly purchases by $10 billion to $75 billion, citing an improving economy. The U.S. trade deficit shrank more than forecast in November, as orders for long-lasting goods climbed by the most in 10 months, reports showed. While job creation in December was less than economists forecast, the unemployment rate fell to 6.7% from 8.1% at the start of 2013.

Stock investors may have already reaped the benefits of this year’s economic growth, according to Todd, who oversees about $950 million at Greenwood Capital in Greenwood, South Carolina.

S&P 500 Forecasts

Gross domestic product will expand 2.6% this year and pick up to 3% next year, according to 78 economists surveyed by Bloomberg. While that’s faster than the 1.7% projected for 2013, Wall Street strategists aren’t betting it will boost the S&P 500 by much. The index will expand 5.8% in 2014, the smallest projection to start a year since 2005, data compiled by Bloomberg show.

“There’s no question that economic growth is ramping,” he said in a Jan. 7 phone interview. “But how much of that is already discounted in the market? For the longest time, it was the economy that was hard to call, but now it’s the market’s reaction that’s the question.”

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