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Market Preview: Getting Conservative

Updated from 5:54 p.m. ET to include information on the approval of a debt deal for Greece by the International Monetary and eurzone officials, as well as news about Dollar General and Las Vegas Sands.

NEW YORK ( TheStreet) -- There's a little more than a month left in 2012, and at least one firm thinks investors shouldn't count on much more upside for stocks from here.

"We suspect that the largest gains for the year are behind us, and recommend conservative positioning for the remainder of the year," wrote Bank of America/Merrill Lynch in commentary on Monday. "Our near term model signals caution, as earnings revisions and management guidance ratios have deteriorated amid a choppy earnings season. And an unusually high number of macro risks appear to be looming, including the US fiscal cliff, Europe and EM growth disappointments, and tensions in the Middle East."

For 2013, B of A strategist Savita Subramanian has a year-end 2013 target of 1600 for the S&P 500, so she remains bullish about the long-term prospects for stocks, supporting that view with a forecast for "modest multiple expansion" with earnings growth pegged at around 7%.

The question mark presented by the fiscal cliff though means a number of wildly differing possibilities remain in play.

"Market implications under various scenarios of the cliff range from the S&P 500 climbing as high as 1600 under a surprise resolution, pulling forward next year's gains, to falling to 1250 if we were to go over the cliff for a short period of time before it is fixed retroactively," the firm said. "In the unlikely event that we go over the cliff for an extended period of time and a recession ensues, we think the market could correct to 1000."

B of A is suggesting investors " s tick with cash return, quality and secular growth for the remainder of 2012," and offered up this positioning from a sector standpoint: overweight on consumer staples and technology; market weight on consumer discretionary, health care, industrials, energy, telecom and utilities; and underweight on financials and materials.

It's been a rocky road for stocks since the Federal Reserve announced neverending QE3 in mid-September. Last week, the major U.S. equity averages caught a big bounce, enjoying their best weekly performance since June. Getting conservative now seems to make a lot of sense, given how much depends on the vagaries of Capitol Hill, which isn't exactly known for smart, swift action.

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