Struggling US stock market unlikely to collapse

The S&P 500 has been struggling to break decisively above 2,000 in recent weeks. This is hardly surprising given the outlook for Fed policy. However, we doubt monetary tightening will drive US equity prices significantly lower. And those expecting a major pull-back on the basis that valuations and profit margins are well above their long-run averages are also likely to be disappointed. We expect the index to fall only a little further from here and are sticking with our end-2014 forecast of 1,950. What’s more, we expect the stock market to grind higher again next year.