We met with a range of investors this week to discuss our outlook for US equities in the coming year. We expect sub-trend economic growth, 3% growth in S&P 500 earnings (to $100), and flat valuation, leading to a year-end 2012 target of 1250. Most clients agreed with our view, with pushback focused on margins and Europe. Bullish investors believe margins will grow from the current record levels and boost earnings. Others expect resolution in Europe will buoy investor confidence and that the S&P 500 could reach 1400. A small number of investors expect a collapse of the euro; we estimate the market could trade down to 900 in this scenario.
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