Laszlo Birinyi Believes the S&P 500 Could Reach 1,700 By Year-End

By on March 6, 2012

Laszlo Birinyi - Birinyi AssociatesLaszlo Birinyi, Birinyi Associates, is predicting the S&P 500 could reach 1,700 before the end of the year based on historical patterns.

CNBC’s Melissa Lee asked Birinyi what he saw that was similar between this year’s market and the ones in 1982 and 1990. Birinyi responded that they were markets that got off to a very strong start. He indicated that since 2009 the best gauge of the market has been historical patterns.

Birinyi stated he was intrigued by what the market did in 1994, which was very little. He added that the consensus going into 1995 was that the stock market wasn’t going to do anything and the bond market was going to do a lot worse. Birinyi said just the opposite happened. Interest rates went down and everyone found they had made the wrong bet, the stock market went up 35%, which was the best market in 50 years.

Birinyi said this year the bet is GDP will be 2.5%. Birinyi said he looks at the market and sees Cummins Engine, Salesforce.com, Microsoft, and General Motors up 20, 30 and 40 percent and he thinks the market might be forecasting a good economy. He wonders if we’re prepared for a 3-4% GDP. If this occurs he believes we could have a mirror of 1995 where the market surprises everyone on the upside.

Lee asked Birinyi if he believed all stocks would participate in the rally he foresees. Birinyi said investors should focus on stock selection and said while the S&P 500 gained 10% in the 4th quarter, almost 20% of the stocks in the index doubled the return of the 500. Birinyi believes those stocks that have been strong will continue to outperform and gave the example of Apple, which despite its run-up, trades at a discount to Consolidated Edison.

The interview continued with Birinyi responding to Simon Hobbs (playing Devil’s advocate) regarding European concerns and the fact the market has already doubled from its bottom so developments Birinyi sees may already be discounted.

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