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Cohen: Stocks undervalued
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November 14, 2000: 10:35 a.m. ET
Strategist says stock valuations are at the most attractive levels of the year
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NEW YORK (CNNfn) - Abby Joseph Cohen, the influential Goldman Sachs strategist, said Tuesday that the S&P 500 is 15 percent undervalued and suggested the stock market's 10-week sell-off has created opportunities to pick up stocks at reasonable prices.
"Equity valuation has improved since March," wrote Cohen, who called share prices "the most attractive they have been all year."
 In a note to clients, the Goldman strategist said the economy has cooled in recent months but remains in good shape. Inflation is tame, while the Federal Reserve is likely finished raising interest rates.
The comments come one day ahead of the Fed's next meeting, when analysts expect no change in monetary policy. But some economists forecast a rate cut early next year following the central bank's year-long campaign of credit tightening.
Cohen stayed more cautious.
"Federal Reserve action to boost interest rates has lessened notably," she wrote.
When it comes to stock forecasting, Cohen said she believes that, taking a 12-month view, the S&P 500 is about 15 percent undervalued -- meaning in a rational market the index of large-company stocks could advance that much in the year ahead.
"Today the markets are already priced for imperfection," said Cohen, the Wall Street analyst most able to move markets. Her influence may have had an impact Tuesday, as stocks rose at the open.
 In a follow-up e-mail, Jonathan A. DeCristofaro, who works in Goldman's investment research division, said the firm's year-end target for the S&P 500 remains at 1,575, a bullish increase from Tuesday's 1,367 range.
The 1,575 S&P forecast seemed modest when Cohen issued it 12 months ago. But stocks have crumbled since and now that year-end target means a 16.5 percent gain for the index between Monday's close and the start of 2001.
Referring to the market's losses, Cohen said profit growth has slowed with the economy. She also cited the still-undecided presidential election and high oil prices, which briefly rose above $36 a barrel in September.
But Cohen believes crude prices should peak by this spring, a move that could slow inflation and allow consumers and businesses to divert spending away from energy costs and into other needs. 
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Goldman Sachs
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