Hedge fund Omega Advisors expects to see the U.S. stock market's bull run continue into next year, fueled by steady economic growth and a corporate takeover boom.
"My expectation is for the Standard & Poor's 500 (stock market index) to gain 7 percent to 9 percent in 2015," Steven Einhorn, Omega's vice chairman said. He made his remarks at the Reuters Global Investment Outlook Summit in New York.
Next year's gains likely will be fueled by a continued boom in corporate takeovers. And borrowing costs should remain at rock-bottom levels as the Federal Reserve raises interest rates slowly and deliberately, Einhorn explained.
Omega, founded by Leon Cooperman two decades ago and seen as one of the world's most widely watched hedge funds, invests primarily in U.S. equities and owns stocks including Actavis Inc., the pharmaceutical company making a bid for rival Allergan, and Apple Inc., the world's most valuable public company.
October's brief stock market tumble, which hurt many hedge funds when investors were crowded into the same names and got out in a hurry, should not overshadow next year's prognosis.
"October portends nothing negative for 2015," Einhorn said.
Indeed, he is looking for the pace of mergers and acquisitions, already high this year, to keep picking up next year as reasonable financing remains available. Sectors such as healthcare could see more activity, he predicted.
He expects economic growth in the United States to be somewhere between 2.5 and 3 percent, which he says is preferable to robust growth which might frighten the Fed into raising rates more quickly.
For now, he expects rate increases to happen at a measured pace which should be a positive signal for investors, underscoring that the economy is growing steadily while not booming.
Looking to Europe, Einhorn said there are even more opportunities there for smart stock market investments next year, especially given the European Central Bank's easy money policies.
Earnings growth, for example, is likely to be in the low to middle double digits in Europe, outpacing U.S. estimates.
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