Adam S. Parker, Ph.D.
US Equity Strategist
Morgan Stanley & Co.

Our 2014 forecast for the S&P 500 Index is 2,014 (see table). That may look like a big number, but it doesn’t take a giant leap to get there. It represents 9% potential upside from the 2013 close, driven by our estimate of 6% operating earnings growth, net 3% share repurchases and modest expansion of the forward price/earnings (P/E) multiple. Relative to our prior view, this represents about a 0.8 turn more in the P/E multiple—and there is potential for more. The low dispersion of price/forward earnings and higher company-specific risk lead us to conclude that a more concentrated portfolio will be prudent this year...