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The face of a trader is reflected on the screen of a terminal on the floor of the New York Stock Exchange September 29, 2014.LUCAS JACKSON/Reuters

Take an improving U.S. economy, add strong earnings growth and an impending boom in capital spending and you have everything you need for an ongoing bull market.

That's the takeaway from Brian Belski, chief investment strategist at BMO Nesbitt Burns, in his year-ahead outlook for the market – or, to be more accurate, his multiyear-ahead outlook.

"We continue to believe that the current bull market is part of a longer cycle that will eventually last 15 [to] 20 years in totality," he said in his report, implying that investors should see significant gains well into the next decade.

Over the next three to five years alone, he believes the S&P 500 will return an average of 8 to 10 per cent a year.

Strategists are up against significant hurdles when they forecast that the bull market has plenty of life left in it: Stocks are expensive relative to reported earnings and the runup in stocks is approaching its six anniversary in March, 2015, making it one of the longest bull markets on record.

Mr. Belski recognizes these hurdles, along with the idea that many investors have suffered psychological damage since 2000, from recessions, wars, 9/11 and bad behaviour from Corporate America – leaving an aura of fear hanging over stocks.

"However, this fear has caused investors to somewhat overlook the massive structural reforms that U.S. companies have undertaken … to position themselves as one of the best fundamental assets in the world," he said.

Balance sheets are in the best shape since the 1950s and companies are generating the most stable earnings growth in decades, he added.

Yes, valuations are stretched. The S&P 500 should end the year at about 17 times earnings, which is above the historical norm.

But Mr. Belski believes the high price-to-earnings ratio merely limits stock market gains, rather than eliminating them altogether.

If valuations have peaked, stocks can still deliver gains through rising earnings that come from improving economic conditions.

He forecasts that the S&P 500 will rise to 2,250 by the end of next year – up about 9.7 per cent from his 2014 target of 2,050, as earnings rise 8.6 per cent.

Much of Mr. Belski's bullish outlook revolves around the U.S. economy maintaining its healthy glow relative to the rest of the world, especially emerging markets and Europe.

But there is more than an economic attraction at work here. U.S. companies have been reluctant to invest significant money in their operations in recent years, due to their defensive positioning. Instead, they have dazzled investors with share buybacks.

Buybacks are losing some of their sizzle, though: Companies with the biggest buyback programs have seen their share prices idle over the past year. That should push companies to invest for future growth opportunities.

"The way we see it is that there is a tremendous amount of pent-up investment spending demand," Mr. Belski said. "The enormous pile of cash sitting on corporate balance sheets makes the case even stronger, particularly as economic conditions continue to gradually improve and the 'fear factor' is removed from corporate management consciousness."

This revival in capital expenditures, or capex, is at the heart of his stock selection. When capex is rising, cyclical areas tend of outperform – specifically, energy, industrials and technology.

Mr. Belski is shying away from energy, given what he calls "a secular change in the supply and demand dynamics of crude oil." But he stands by the other two sectors, even as the Federal Reserve starts to raise its key interest rate.

"A change in Fed policy will only bring credibility to the fundamental improvement of U.S. stocks," he said. "Therefore, any reactive moves to the downside will be exactly that – reactions – thereby providing opportunities for more disciplined investors."

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