Why I Believe the S&P 500 Could Easily Reach 2,000 in the Upcoming Months

It’s amazing how the stock market can easily reverse course from bad to good and vice versa. When the threat of Russia invading Crimea picked up, the stock market retrenched; but it didn’t last long, as the subsequent withdrawal of Russian troops led to a stock market in the following days that drove the S&P 500 to yet another record-high and the NASDAQ to its highest point in 14 years. Now whispers of 5,000 are being heard. (Read “Where to Find the Best Buying Opportunity in This Stock Market Going Forward.”)

As I said in a previous column, the retrenchment in the stock market presented a buying opportunity; although, it’s too bad the selling didn’t last longer.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) continues to hover in the mid-teens, where it was throughout the majority of 2013 when the stock market boomed. The current relatively low reading in the VIX suggests the stock market will likely head higher, which means investors should stay put and add on weakness.

A look at the S&P 500 shows a likely break at 1,900 this week if the bulls can hold on, and it will just be a matter of time before we see the index take a run at 2,000, which I surmise could happen sometime in the second half of the year; however, it could occur in the next couple months, if the bulls decide to drive the buying and if the economic renewal continues worldwide. A move to 2,000 would represent only a 6.38% advance from the prevailing level at around 1,880 as of last Friday. That’s clearly achievable and would mean the index would be up 8.23% for the year, which was within my initial target set at the start of the year. You can buy S&P 500 exchange-traded funds (ETFs) to play the move in addition to adding stocks.

The number of jobs created in February came in at 175,000, which was better than I would expect, given the soft Automatic Data Processing (ADP) jobs reading and the fact the winter has been horrible for the jobs market. As we move into March and the warmer months, it will be interesting to see if the monthly number grows. A return to the 200,000 level would add some confidence to the stock market.

The unemployment rate edged up to 6.7%, which is still just above the target of 6.5% set by the Federal Reserve before the central bank decides whether or not to increase interest rates. My feeling is the Fed will likely wait for more steady jobs growth before deciding.

At this juncture unless we see the situation in the Ukraine worsen, I sense the stock market will edge higher, but the advance will likely be nowhere near what we saw in 2013. Russia has too much to lose both monetarily and politically, so I doubt Putin will pursue more aggressive behavior at this time—but you never know, so investors need to be alert.

As we move ahead, look at stock market weakness as a buying opportunity. The bigger the discount, the more you would buy.

 

This article Why I Believe the S&P 500 Could Easily Reach 2,000 in the Upcoming Months was originally posted at ProfitConfidential