Gamco Investors Inc.’s Howard Ward said he is fully invested in equities and sees the Standard & Poor’s 500 Index surpassing 1,500 in the next year, helped by a recovery in consumer spending and housing.
The S&P 500 is down 1.9 percent in October, poised to end four straight months of gains, after disappointing results at companies from 3M Co. to DuPont Co. About 60 percent of companies that have reported third-quarter sales have missed analysts’ estimates, according to data compiled by Bloomberg.
Ward said the benchmark gauge for U.S. stocks was due to decline after being up as much as 15 percent from this year’s low. Investors should focus on earnings estimates for 2013 rather than short-term retreats, he said.
“The key is what are earnings going to be next year,” Ward, chief investment officer of growth equities at Gamco in Rye, New York, said in a television interview on “Bloomberg Surveillance.” His firm oversees $36 billion in client assets. “The consumer is spending. In fact, the consumer is doing pretty well.”
Analysts project combined profit at companies in the S&P 500 will be $104.64 this year and increase 11 percent to $115.80 in 2013, Bloomberg data show. Retail sales in September and August had the best back-to-back showing since late 2010. Data from the Commerce Department showed today that purchases of new U.S. homes rose in September to the highest level in more than two years.
“Housing after a six-year bear market is recovering,” Ward said. “The data right now is overwhelming that housing is doing better.”
Ward said on Sept. 10 U.S. stocks may rally to record highs in the next four months as consumers increase spending and help drive up corporate earnings.
The S&P 500 has fallen 3.5 percent since reaching a more than four-year high of 1,465.77 on Sept. 14. Ward said today that S&P 500 will not suffer a 10 percent decline as long as the economy can avoid the so-called fiscal cliff, or the $600 billion of tax increases and spending cuts that will take effect automatically at the end of the year unless Congress acts.
“You should not be reactive to these impulses in the market that can really be in the hands of the high-frequency traders,” Ward said to investors. “Ignore it. There’s a lot of noise. There were a lot of occasions in the last year where we had big swings in the market on any given day, only to see the market rally the next day.”
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