Record-high stocks no worry, Goldman’s Cohen says

Value remains in the U.S. stock market even after the S&P 500 has surged 25% this year to a record, according to Abby Joseph Cohen, a senior investment strategist at The Goldman Sachs Group Inc.
Price-earnings ratios are lower now than the last time stocks were near these levels, Ms. Cohen said in a Bloomberg Radio interview. She forecasts the S&P 500 will reach 1,900 by the end of 2014, a 6.6% gain from Wednesday’s close.
“Companies right now are increasingly enthusiastic about the dynamism in the economy,” said Ms. Cohen. “There’s value in the market right now. The U.S. economy will likely grow faster next year.”
On Wednesday, the S&P 500 gained 0.8% to a record 1,782, surpassing a previous high set Oct. 29 and heading for the steepest annual rally in a decade. Ms. Cohen’s forecast for the gauge to reach 1,900 by the end of 2014 matches the median estimate in a Bloomberg news survey of strategists this month.
Gains in stocks have come as the Federal Reserve maintained its unprecedented stimulus. Ms. Yellen, nominated to be the next chairman of the Fed, said Wednesday in testimony during her confirmation hearing before the Senate Banking Committee that the economy and labor market are performing “far short of their potential” and must improve before the central bank can begin reducing its $85 billion in monthly asset purchases.
Ms. Cohen called Ms. Yellen one of the finest policy analysts in the U.S. and deserves to be confirmed.
The S&P 500 is trading at 16.1 times projected earnings, compared with a five-year average of 14 times, according to data compiled by Bloomberg. Of the more than 450 index members that have reported earnings this season, 75% have posted profit that exceeded analysts’ estimates, while 54% beat sales predictions, data compiled by Bloomberg show.
(Bloomberg News)