Fed Rates
When Biggs bought shares in March 2009, the purchases were a contrarian bet driven by what he said was the highest level of bearish sentiment ever. Lehman Brothers Holdings Inc. had collapsed six months earlier, Warren Buffett, the chairman of Berkshire Hathaway Inc., said the economy was in "shambles" and New York University's Nouriel Roubini, who foresaw the crisis, said the S&P 500 may fall to 600.

Stocks surged as record-low Federal Reserve interest rates, along with a $787 billion stimulus bill signed into law by U.S. President Barack Obama and his administration's plan to rid banks of toxic assets, boosted investor confidence. Buying shares is a "potentially good deal" for long-term investors, Obama said six days before the slump ended.

Now Biggs is counting on economic and profit growth to spur gains. Citigroup Inc.'s Economic Surprise Index for the U.S., a gauge of how much reports are exceeding the median economist estimates in Bloomberg News surveys, surged to a record last week as manufacturing growth topped forecasts and the jobless rate unexpectedly fell to an almost two-year low.

'Major Expansion'
S&P 500 companies will boost earnings by 17% during the next 12 months to a record $99.57 a share, according to analyst estimates compiled by Bloomberg. Profits in the MSCI All-Country Index may climb 20%, analyst forecasts show.

"We're in a major expansion globally," according to Fisher, who oversees $44 billion at Woodside, California-based Fisher Investments Inc. and said in September 2009 that the rally in equities was too big to reverse. "Corporate earnings are great."

The S&P 500's annualized appreciation since the 2009 low is 43%, compared with predictions for a "new normal" of below-average returns by Mohamed El-Erian and Bill Gross, the co-chief investment officers at Pacific Investment Management Co., which oversees the world's largest bond fund in Newport Beach, California. Pimco said in May 2009 that financial assets would trail historical averages because of government deficits and increased regulation.

Sell Warnings
"Today, markets are reacting to a tug of war," El-Erian said in an e-mail to Bloomberg News yesterday. "On the one hand, improving endogenous growth dynamics in the U.S. and core Europe, and particularly Germany. And, on the other hand, headwinds including high and volatile oil prices, complex policy challenges, budget uncertainties and Europe's peripheral debt crisis."

For analysts who warned investors to sell before the credit crisis that sent the S&P 500 down as much as 57% starting in 2007, the rally proved harder to anticipate. David Rosenberg of Gluskin Sheff & Associates Inc., ranked the No. 2 economist by Institutional Investor magazine in 2008, and Roubini stuck to bearish forecasts. Now, they say the end of stimulus spending and rising oil may threaten returns.

Rosenberg, based in Toronto, said in March 2009 that the S&P 500 was at risk of falling to 600 by October of that year. Instead, it climbed 53% to 1,036.19 on Oct. 30. Three days before the index reached its 2010 low, Rosenberg saw a pattern that he said would bring more stock losses and cited the outlook for earnings and "heightened uncertainty" about the economy. The U.S. expanded at 2.6% and 2.8% annual rates in the third and fourth quarters, respectively, while S&P 500 earnings exceeded estimates in both periods.

No Straight Line
"Nothing moves in a straight line," Rosenberg said yesterday in an e-mailed response to questions from Bloomberg News. The economic expansion is already reflected in stock prices, and the market will probably fall once the Fed stops buying assets, he said. It's "time to take risk off the table," he said.