With analysts forecasting S&P 500 companies will earn an average of $105 per share in 2012, the broad index is currently trading at just 13 times that estimate, well below the historical average of 15. Even if the price-to-earnings ratio were to expand to the historical average, that would put the S&P 500 at 1575 by year-end, up 16% from where it is now.
"Historically cheap valuations are icing on the cake," said Doug Cote, chief market strategist at ING Investment. "Global risks are always looming, but we believe investors need to put fear aside, grab a red cape and jump into the ring with this raging bull."
Wall Street just closed out its best first quarter since 1998, and while most experts believe stocks will continue to head higher this year, the recent momentum will subside, and there could be a few dips along the way.
