We are nowhere near the top on the S&P 500, says Canaccord’s Dwyer

The S&P 500 is up more than 18% this, year, but one expert says we are nowhere near the top.

Tony Dwyer, Chief Equity Strategist, Canaccord Genuity was on BNN’s “The Street” yesterday to talk about the S&P 500, which he thinks will tack on another 15% by the end of next year.

Dwyer says economic activity is driven by the steepness of the yield curve and availability of money. He says that with the talk of tapering (the timeline for the Fed’s eventual reduction of its $85 Billion monthly purchases of Treasuries and Mortgage Backed Securities) we got a “re-steepening” of the yield curve, which is going to incent lending standards to ease and will create more money and more spending.

He says there is a myth about interest rates that says the equity markets can’t go up as the Fed starts to taper. Dwyer thinks the opposite will happen because he thinks the difference between short term and long term interest rates is creating an environment in which it is becoming highly profitable for banks to lend money.

Dwyer says the interest rate scenario pairs up with corporate earnings and debt reissuances that are at record levels. Add in lending standards that are easing, and he says the perfect storm exists to push the markets higher.

Dwyer says talk of a recession is overblown. He says the only thing that has been proven to predict a recession with any accuracy is an inverted yield curve (when short term interest rates are higher than long term interest rates). The current yield curve is historically, extremely steep, he says.

The Canaccord strategists’s call is for an S&P of 1955 by the end of 2014 but says he actually may end up being 15% too low with the call. “The market is just silly cheap”, he says.

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