Stock market outlook: Challenging road ahead

According to an exclusive CNNMoney survey, the S&P 500 will finish the year just above 1,400, giving it a 4% rise over the next six months, which of course pales in comparison to the 8% increase logged during the first half of the year.

NEW YORK (CNNMoney) -- While Wall Street experts are forecasting the stock market will end 2012 with double-digit gains, they also largely agree that the second half of the year will be more challenging than the first.

According to an exclusive CNNMoney survey of 30 investment strategists and money managers, the S&P 500 (SPX) will finish the year just above 1,400, giving it a 4% rise over the next six months, which of course pales in comparison to the 8% increase logged during the first half of the year.

Experts said the gains will be tempered as jittery investors face a growing number of challenges, especially a dimming outlook in Europe and uncertainty over the United States' political and fiscal future.

"Sentiment is fairly negative, and investors are still very cautious, so there will be a lot of ups and downs in the stock market along the way," said Gary Thayer, chief macro strategist at Wells Fargo Advisors.

Nearly half of those surveyed highlighted Europe's ongoing debt crisis as the market's biggest headwind.

While leaders will continue to make an effort to keep the region intact, the solutions will only be temporary, as they have been since Europe's debt crisis took center stage roughly two years ago.

"They'll keep coming up with different band-aid proposals that will kick the can further down the road," said Donald Selkin, chief market strategist at National Securities. "Stocks will go up, then down, and just keep muddling along."

While support from the world's central banks and other authorities will provide temporary boosts to the market, investors will continue to view those as incremental steps, still thirsting for a more stable eurozone.

"With Europe, it's been two steps forward and one step back for the past couple of years," said Wells Fargo's Thayer. "They've made progress, but there's a lot further to go."

Experts say investors will also be skittish leading up to the U.S. presidential elections in 2012, causing volatile trading that could be even worse than the sharp gyrations suffered in the aftermath of the debt ceiling debacle in 2011.

Leading up to November, lawmakers will continue to debate how to handle the onset of big tax increases and spending cuts that will be triggered on Jan. 1 unless Congress acts. While the talks remain gridlocked as Democrats and Republicans dig in their heels, some experts are optimistic that the tone will shift after election.

"The economy is not strong enough to weather what all is set to take place, so more likely than not, policymakers in Congress will scale back some of the changes that are part of the fiscal cliff," said Thayer.

Though 75% of those surveyed agree that a win by Republican hopeful Mitt Romney, who favors extending all of the Bush-era tax cuts, will be more supportive of stock prices, Selkin said a relief rally could follow no matter what the outcome.

"Investors will have more clarity on how politicians will steer away from the potential fiscal cliff, so that should help spur a rally no matter who wins," he said.