Goldman's Cohen: Stocks Can Still Climb 14 Percent This Year

The economy and stock market will likely experience good times ahead, says Abby Joseph Cohen, global market strategist for Goldman Sachs.

While many experts say the 71 percent rally in the Standard & Poor’s 500 Index during the past year indicates stocks are overvalued, Cohen disagrees.

"The stock market is almost always a discounting mechanism,” she said..

“It almost always moves in advance of the economy, but we don't think it has moved too far at this point," she told CNBC.

Cohen, who made her name with bullish market calls in the 1990s, expects the S&P 500 to trade around 1,250 to 1,300 at year-end. That would be a 9 percent to 14 percent increase from the current level of 1,150.

Lower volatility and less correlation between different financial markets are making investors more comfortable about investing in stocks, she says.

Another way to look at it: “Since the end of 2003, the GDP has expanded dramatically more than stock prices,” Cohen said. That gives stocks more room to rise.

As for the economy, rising corporate cash flow; improved, albeit still weak, employment data; and increasing durable goods orders represent positive signs, Cohen says.

Economic guru Nouriel Roubini begs to differ.

In a report to clients, he wrote, “A slew of poor economic data over the past two weeks suggests that the U.S. economy in 2010 is headed for – at best – a U-shaped recovery.”