JPMorgan Sees Even More Reason for Stock Optimism

One of Wall Street’s most optimistic equity strategists told clients that the Standard & Poor’s 500 Index may rise even more than he expects this year. “There is actually upside risk,” JPMorgan Chase & Co.’s Thomas J. Lee, wrote in a report yesterday. He expects the S&P 500 to end the year at 1,100, or 21 percent higher than yesterday’s close. The CHART OF THE DAY shows how his estimate, which he has left unchanged all year, compares with the average projection of strategists in a Bloomberg survey. Lee is tied with David Bianco of UBS AG for the highest year-end number. The S&P 500’s last close before Lehman Brothers Holdings Inc. filed for bankruptcy in September is included in the chart. Declines in share prices and the U.S. economy “snowballed” in the wake of the firm’s collapse, Lee wrote. “At that time, many would argue, stocks reflected a 2008/2009 recession.” Stable retail sales, a pickup in pending home sales, and other indicators signal the recession may hit bottom by midyear, leading to higher share prices, the report said. The S&P 500 rose 34 percent from its March 9 low through yesterday’s close. “We want to become ‘slow buyers’ of stocks,” he wrote, citing the likelihood that prices will drop below their March lows before rising anew. This so-called retest would serve as a trigger to buy “in a larger way.”