(Bloomberg News) Laszlo Birinyi, whose prediction the bull market would weather a five-month retreat came true in October when the Standard & Poor's 500 Index rallied 11 percent, says stocks will keep climbing in 2012.
Equities will gain at least 8 percent as improving corporate profits force bears to capitulate, according to Birinyi, who manages $400 million in Westport, Connecticut. Forecasts for declines from economists Gary Shilling and Nouriel Roubini were repudiated in 2011 as the benchmark gauge for American equities erased a 13 percent drop.
Birinyi, who advised holding stocks in August as the U.S. government was stripped of its AAA credit rating and strategists cut forecasts faster than any time since the credit crisis, said shares will climb for years to come if history is any guide. Shilling, president of A. Gary Shilling & Co., predicts equity investors will lose money in 2012 as consumer spending drops.
"Many concerns are opinions, but not necessarily facts," Birinyi, president of Birinyi Associates Inc., said in a telephone interview on Jan. 4. "Later in the year, things will get a little bit better and sentiment will change, and we end up at the last leg where we've got the last-guy-in-the-pool scenario."
Annual 28% Returns
The S&P 500 has risen 89 percent since March 2009, returning 28 percent a year to investors including dividends as U.S. gross domestic product expanded at an average rate of 2.4 percent over nine quarters. After ending 2011 virtually unchanged, the index gained 1.6 percent to 1,277.81 last week, the biggest rally to start a year since 2006. The S&P 500 advanced 0.9 percent to 1,292.06 at 9:44 a.m. in New York today.
While U.S. stocks avoided a bear market in 2011, they posted their biggest decline since 2008, falling 19.4 percent between April and October. Investors outside the U.S. suffered bigger losses, with the Stoxx Europe 600 plunging 26 percent and China's Shanghai Stock Exchange Composite Index tumbling about 30 percent. About $6 trillion was erased from global equity values last year, the second annual decline since 2002.
The Chicago Board Options Exchange Volatility Index, a gauge of investor concern derived from equity derivatives, averaged 24.2 in 2011, the third-highest level in the last nine years behind 2008 and 2009, data compiled by Bloomberg show. It reached a 29-month high of 48 on Aug. 8. The Dow Jones Industrial Average swung 400 points for four straight days for the first time ever in August.
The average S&P 500 estimate from 13 Wall Street strategists tracked by Bloomberg fell more than 9 percent from May through November, the most since 2009. Their forecast for a 6.4 percent increase in 2012 at the start of this year was the most conservative since 2005, Bloomberg data show.
"Even though we were basically flat, this was a really volatile year," Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, who helps oversee $14.5 billion, said in a Jan. 5 phone interview. "Negative sentiment is what trapped the U.S. market and then we got range bound because the fear that if Europe slips into a major recession, it takes us with them."