NEW YORK ( The Street) -- There will be few easy gains this year as U.S. stock prices tread water, strategists warn, but select sectors present rich opportunity.
While there are few expectations that the S&P 500's 26% jump in 2013 will be repeated, fund managers say stocks will continue to benefit from the ongoing U.S. economic recovery.
Wells Fargo Securities Senior Analyst Gina Martin Adams forecasts 7% earnings growth in 2014 and favors technology, health care and financials. These sector picks are backed by UBS and ING, with the latter also pointing to industrials and consumer discretionary.
"Slightly stronger earnings growth should be driven by better revenue growth via stronger business investment, export growth, and a reduced drag from fiscal tightening," Adams told investors in a note.
She is underweight consumer staples, utilities, telecoms, energy and materials - suggesting the demand backdrop for these sectors is challenging. She expects the S&P, currently at 1828.3, to be around 1850 by the year-end.
UBS executive director of US Equity Research Julian Emanuel expects higher stock prices, higher interest rates and higher volatility in 2014.
"We expect a period of choppy rotation where laggard sectors such as energy and materials gain on the momentum areas such as consumer discretionary," he told clients in a note. If this volatility begins to look like a correction - a fall of 10% or more from the last market peak - Emanuel advocates buying when the volatility index spikes above 20. The investment bank has a year-end target of 1,950 for the S&P 500, representing a total return of 7.5% from last year's closing levels.