True, most forecasts are for modest gains in 2015, compared with the 13% increase in the S&P 500 (SPY) expected this year. But strategists aren't cutting back their forecasts despite the Fed's signal on Wednesday that rates will be rising next year. Some even say the hike may not come until well into the second half of the year or later. Interest rates are key to 2015 forecasts.
David Kostin, chief U.S. equity strategist at Goldman Sachs, expects the S&P 500 will end 2015 at 2,100 --- 3% above current levels but says they could end a lot higher "if interest rates in 2015 remain below our forecast." Kostin expects the Fed's rate will rise to 0.6% in 2015, up from 0% to 0.25% currently, and the 10-year Treasury yield will reach 3%. (It's currently at 2.2%.)
But if the 10-year Treasury rate tops out at 2.5% or below and there's no change to earnings per share -- Kostin expects $122 per share in the S&P 500 -- or to the risk premium of stocks over Treasuries, he says the S&P could reach 2,300 by the end of 2015.
That's near the 2015 forecast of John Stoltzfus, chief market strategist Oppenheimer. He's targeting 2,311 for the S&P 500 at the end of 2015, supported by improving economic fundamentals, steady increases in earnings and a lower oil price. And he favors consumer discretionary stocks, which will benefit from lower oil prices, as well as industrials, materials, tech and health care stocks.