Market Preview: Getting Conservative
NEW YORK ( TheStreet) -- There's a little more than a month left in 2012, and at least one firm thinks investors shouldn't count on much more upside for stocks from here.
"We suspect that the largest gains for the year are behind us, and recommend conservative positioning for the remainder of the year," wrote Bank of America/Merrill Lynch in commentary on Monday. "Our near term model signals caution, as earnings revisions and management guidance ratios have deteriorated amid a choppy earnings season. And an unusually high number of macro risks appear to be looming, including the US fiscal cliff, Europe and EM growth disappointments, and tensions in the Middle East."
For 2013, B of A strategist Savita Subramanian has a year-end 2013 target of 1600 for the S&P 500 , so she remains bullish about the long-term prospects for stocks, supporting that view with a forecast for "modest multiple expansion" with earnings growth pegged at around 7%.
The question mark presented by the fiscal cliff though means a number of wildly differing possibilities remain in play.
"Market implications under various scenarios of the cliff range from the S&P 500 climbing as high as 1600 under a surprise resolution, pulling forward next year's gains, to falling to 1250 if we were to go over the cliff for a short period of time before it is fixed retroactively," the firm said. "In the unlikely event that we go over the cliff for an extended period of time and a recession ensues, we think the market could correct to 1000."
B of A is suggesting investors "
It's been a rocky road for stocks since the Federal Reserve announced neverending QE3 in mid-September. Last week, the major U.S. equity averages caught a big bounce, enjoying their best weekly performance since June. Getting conservative now seems to make a lot of sense, given how much depends on the vagaries of Capitol Hill, which isn't exactly known for acting for smart, swift action.
As for Tuesday's scheduled news, Green Mountain Coffee Roasters (GMCR) is slated to report its fiscal fourth-quarter results, and the average estimate of analysts polled by Thomson Reuters is for a profit of 48 cents a share in the September-ended period on revenue of $902.7 million.
It's been a rough year for Green Mountain with the company seeing a decline on the top line in the first three quarters of the year in the face of increased competition in the wake of the expiration of its K-cup patents. The stock is down more than 36% in 2012, although it has seen a healthy bounce since scraping a 52-week low of $17.11 on July 23.