Strong economic fundamentals will lift the S&P 500 index to a double-digit increase next year, says renowned market strategist Tom Lee, founder of Fundstrat Global Advisors.
Lee predicts the S&P 500 will end the year at 2,325.
But 2015 still may be a year of agitation for investors, as the ascent takes place through expansion of price-earnings (P/E) ratios. "As you move and mature in a bull market, P/E expansion is really what takes root," he tells
CNBC.
You may not find that a calming thought, given that the S&P 500 already had a trailing P/E ratio of 19.67 as of Dec. 26, up from 18.98 a year ago, according to Birinyi Associates.
"We are going to be surprised. It is going to be an uncomfortable bull market, but investors will need to get used to that," Lee argues.
As for the fundamentals, he sees strong job growth and consumer spending. In addition, "I think housing is going to really strengthen next year," he notes.
"We've got the benefit of lower oil, and I think companies with good balance sheets and better visibility will start to be a bit more aggressive," Lee adds.
"That's going to allow investors to say 'Look the market, even though it's at 16 times I think we can start to think about 16 times next year and then also boost the multiple.'"
Meanwhile, Burton Malkiel, chief investment officer of Wealthfront, says the S&P 500's 40.8 percent gain in the past two years creates a problem for investors.
"With rising U.S. stock prices and low volatility over the past two years, your portfolio is likely to be riskier than it should be," he writes in
The Wall Street Journal.
"The classic mistake individual investors make is to allow risk levels to increase when times are good and then to panic and liquidate their equity holdings during periods of crisis."
So now is a good time to trim your risk, which likely means lightening your stock holdings and some bonds as well.
"While no one can predict the future, stocks and bonds in the U.S. are very richly valued, suggesting that future long-run rates of return will be lower than in the past," Malkiel writes.