The Standard & Poor’s 500 stock index will rise about 12 percent from current levels by the end of the year as the Federal Reserve remains cautious about raising interest rates, said Barry Bannister, head strategist at Stifel Nicolaus & Co.

With no signs of economic recession in the next two years, the market will rise as price-to-earnings ratios expand, he said. That expansion will come as inflation speeds up and investors become more confident about the global economy.

“We have not seen the complacency, euphoria or interest rates we associate with market tops,” Bannister said in a March 23 report obtained by Newsmax Finance. “We expect a late bull market P/E expansion to lift the index to our 2,350 target price.”

The S&P 500 has gained more than 300 percent since bottoming six years ago amid a recession that was triggered by the bursting of the housing bubble and subsequent financial crisis. The Fed responded to the crisis by cutting interest rates to record near-zero lows and buying bonds to push down borrowing costs.

A decline in oil prices since last summer and a cautious Fed are supportive of economic growth, and the market isn’t indicating that a recession is near, Bannister said.

“The Fed and/or oil cause most U.S. recessions and neither looks problematic,” Bannister said. “The S&P 500 typically does not peak until four to six months before the economy.”

In January, he predicted the S&P 500 would end 2015 at 2,375, up from the December 31’s closing level of 2,058.90. In August, Bannister went from being the most bearish Wall Street forecaster to the most bullish, increasing his year-end target for the S&P 500 by 28 percent to 2,300 from 1,800 previously.

Wage trends will be critical to any move by the Fed, according to Irwin Kellner, chief economist at MarketWatch.

“In her public statements, Fed chair Janet Yellen has mentioned wages,” Kellner said. “Evidently, she feels that it is a good indicator of future inflation. The theory here is that when wages rise, it is a sign that economic growth is strengthening enough to increase the demand for workers and thus how much they earn.”

The difficulty with monitoring wages is that they can be skewed by the kind of jobs, he said.

“A plethora of low-paid jobs will skew the average lower, even though those on the job may be garnering pay increases,” Kellner said. “This could mask a tightening in labor markets.”

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