January has been one great month for equity investors. With the Dow Jones Industrial Average up about 6.5% and challenging 14,000 again, and the S&P up more than 5.5% back above 1,500, investors have to be wondering what more they should expect in 2013. Will the DJIA retake a new all-time high, one not seen since 2007? Our take is that stocks will rise in 2013, with the DJIA still making it to a peak of somewhere around 14,590! What is more important than that 14,590 target is that there may even be upside to that price target.
Investor interest has really picked back up now that Washington, D.C., has decided to get out of the way. The fiscal cliff has been largely averted, the tax rates issues are becoming far more clear, and the debt ceiling debate has been kicked down the road. It is still somewhat sad that so many retail investors are only now starting to endorse stocks as an asset class again. Our methodology for picking the DJIA levels has come within about 1% or so of the DJIA prices for the past three years now. However, one caveat should be heeded: this move higher is not likely to be in a straight line. In fact, it would only be normal to expect some violent market corrections along the way.
Here is what we have seen from outside sources. Bank of America Corp. (NYSE: BAC) recently issued its top three reasons to own stocks now. We also identified a group of stocks that analysts expected would rise by 50% to 100% or more in 2013. Credit Suisse Group (NYSE: CS) raised its expectations in select industrial stocks. We have even seen stronger calls from BofA on transportation stocks despite these being close to highs again. And what about Credit Suisse making a daring pre-earnings season call on an irresistible cyclical bottom in chip stocks?
The big move of the year has been that the market has risen at a time when Apple Inc. (NASDAQ: AAPL) has fallen out of bed and lost its status as America’s number-one stock darling. Now investors are piling back into the growth engine of Netflix Inc. (NASDAQ: NFLX), even as its credit ratings were given some caution of late.