WASHINGTON (MarketWatch) - The annual meeting of the mutual-fund industry's trade group kicked off on a bright note Wednesday, with a pair of notable investment strategists contending that the Standard & Poor's 500 Index will top 1000 by year-end.
Abby Joseph Cohen, senior investment strategist and president of the Global Markets Institute at Goldman, Sachs & Co. and Legg Mason Inc.'s Bill Miller both said
they see the benchmark stock-index gaining at least 20% for 2009.
Cohen said "compelling" valuations, greater investor comfort with the market and improved consumer sentiment will bring cash sitting on the sidelines back into stocks. She said stock moves are starting to reflect company fundamentals rather than momentum -- a telling sign.
"Money has started to come back, but gingerly," Cohen said.
"It's a behavioral fact that money chases returns," added Miller, manager of Legg Mason Value Trust . "As the market goes up, the money comes back."
Better odds
Cohen and Miller spoke at the opening panel session of the Investment Company Institute's General Membership Meeting.
Asked by panel moderator Martin Flanagan, president and chief executive of Invesco Ltd. where they expected the 500-stock index to be at the end of the year, Cohen said Goldman Sachs puts fair value between 1000 and 1050. The market bottomed in early March, she said. Miller predicted the index would hit between 1100 and 1200. The S&P 500 closed Wednesday at 920.
As for their most bullish ideas over the next two years, Miller said he favored the U.S. financials sector, while Cohen said simply U.S. stocks.
"Everything is on sale," in the financial markets, Miller said. [why didn't he say that in early March?]
While seeing stabilization in the housing crises in most cities, Cohen said a recovery in home prices would take some time.
"I think investors will be more comfortable in stocks than in real estate [for investment purposes]," she said.
Miller was more optimistic on the chance of a rebound in house prices, saying that prices will be "modestly higher" in 2010.
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