Political and corporate margin issues could pull down stocks in the second half of 2008, says Citigroup’s (NYSE:C) Tobias Levkovich. As a result, the firm’s chief U.S. equity strategist is predicting the S&P 500 index will be 1,675 by the end of next year, which is below his mid-year target of 1,725.
The index closed at 1,484.25 last week.
Mr. Levkovich’s new target for the Dow Jones Industrial Average is 15,100, which implies a gain of roughly 5% from his 2007 year-end forecast of 14,400. His 2008 mid-year target is 15,500.
The Dow ended last week at 13,442.52.
While equities investors may find trends in the second half of 2008 challenging, Mr. Levkovich says the potential for near-term gains appears high, particularly given the likelihood of the U.S. Federal Reserve to add incremental liquidity.
“We envision strength in both the financials and consumer discretionary sectors as a result of very low investor expectations and traditional positive reaction to rate cuts,” he told clients in a note.