Strategists See 17% S&P 500 Rise After Saying Ã¢â¬ËBuyÃ¢â¬â¢ By Lynn Thomasson Jan. 5 (Bloomberg) -- The same Wall Street strategists who told investors to buy stocks in the worst year since 1937 are even more bullish than a year ago, predicting the Standard & PoorÃ¢â¬â¢s 500 Index will rise 17 percent. UBS AG, JPMorgan Chase & Co. and Deutsche Bank AG say the Federal ReserveÃ¢â¬â¢s decision to cut interest rates to as low as zero percent will help revive the U.S. economy and drive investors back to equities. Cheaper fuel prices and more than $850 billion in spending on roads, bridges and health care will send stocks higher, the strategists said. Even if theyÃ¢â¬â¢re right, the S&P 500 would end 2009 at 1,056, 28 percent below where the benchmark index for American equities started in 2008 and 35 percent lower than where the analysts said it would be now, based on the consensus of 11 strategists surveyed by Bloomberg News. Some of the biggest investors are growing more optimistic as the S&P 500 advanced 24 percent since reaching an 11-year low on Nov. 20. Ã¢â¬ÅEquities usually find a bottom about halfway through a recession,Ã¢â¬Â said Binky Chadha, the New York-based chief U.S. equity strategist at Deutsche Bank who predicted the S&P 500 would climb 12 percent in 2008 and expects a 26 percent surge this year. Ã¢â¬ÅIf policy gets it right, we should find a bottom and start to turn around. And if that happens, then itÃ¢â¬â¢s time to buy stocks.Ã¢â¬Â $29 Trillion Wall Street analysts lost credibility in 2008 when none predicted a down year and the average forecast was for a gain of 11 percent, according to data compiled by Bloomberg. Instead, the S&P 500 tumbled 38 percent to 903.25 and $29 trillion was erased from global markets. The projections for this year would represent the best annual performance since 2003, when the S&P 500 climbed 26 percent. U.S. stocks fell as concern that a slump in corporate profits will stretch into 2009 overshadowed speculation the government will step up efforts to revive the economy with tax cuts. The S&P 500 lost 0.5 percent to 927.26 as of 9:30 a.m. in New York. Concern that stock losses will deepen remains elevated even after falling from record levels in October and November. The Chicago Board Options Exchange Volatility Index, which measures price swings, ended 2008 at 40, up 78 percent from a year ago and more than triple the level at the start of 2007. TED Spread The Libor-OIS spread, a measure of cash scarcity, closed 2008 at 121 basis points after averaging about nine basis points in the year before credit markets started freezing up in August 2007. The difference between what the U.S. government and banks pay to borrow for three months, the so-called TED Spread, is about three times higher than before the credit crisis started, according to data compiled by Bloomberg. Treasuries returned 14 percent last year, the most since 1995, according to Merrill Lynch & Co. indexes. Investors sought the relative safety of government debt as losses and writedowns at the worldÃ¢â¬â¢s biggest financial companies rose toward $1 trillion and the economies of the U.S., Europe and Japan fell into the first simultaneous recessions since World War II. Ã¢â¬ÅPeople have been telling the investing public for the past six months to stay the course or buy this great opportunity, and itÃ¢â¬â¢s turned out to be a liability,Ã¢â¬Â said Randy Bateman, who oversees $15 billion as chief investment officer of the asset management unit of Huntington Bancshares Inc. in Columbus, Ohio. Ã¢â¬ÅAny outlook right now is subject to a great deal of skepticism.Ã¢â¬Â Ã¢â¬ËAll Available ToolsÃ¢â¬â¢ Stocks rallied at the end of the year as the Fed said it will Ã¢â¬Åemploy all available toolsÃ¢â¬Â to revive the economy and President-elect Barack Obama pledged to boost growth through the biggest infrastructure investment since the 1950s. The combination of government stimulus and oilÃ¢â¬â¢s 69 percent drop from its July record of $147.27 a barrel may pop the Ã¢â¬Åbubble of pessimismÃ¢â¬Â toward stocks, according to David Bianco of UBS, Wall StreetÃ¢â¬â¢s biggest bull. Ã¢â¬ÅThe consensus outlook for 2009 is a full year of gloom,Ã¢â¬Â Bianco, 33, wrote in his annual market outlook last month. Ã¢â¬ÅWe believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect.Ã¢â¬Â The S&P 500 began recovering an average five months before recessions ended in 1975, 1982, and 1991, data compiled by Bloomberg show. Ã¢â¬ËGreatest RoarsÃ¢â¬â¢ Bianco predicted 12 months ago that the S&P 500 would climb 16 percent in 2008, and stayed bullish after the subprime mortgage meltdown spurred the collapse of Bear Stearns Cos., then the fifth-largest U.S. securities firm, in March. He said in a July interview with Bloomberg News that the rebound in stocks during the second half of 2008 would be the Ã¢â¬Åone of the greatest roars weÃ¢â¬â¢ve seen.Ã¢â¬Â UBSÃ¢â¬â¢s New York-based equity strategist now expects the S&P 500 to reach 1,300 this year as share prices cheap relative to earnings become irresistible. Last yearÃ¢â¬â¢s slump left S&P 500 companies valued at an average 12.9 times operating profit, near the lowest since at least 1998, monthly data compiled by Bloomberg show. The S&P 500Ã¢â¬â¢s dividend yield may be the Ã¢â¬Åmost compellingÃ¢â¬Â signal that stocks are inexpensive, Abhijit Chakrabortti, Morgan StanleyÃ¢â¬â¢s New York-based head of global equity strategy, wrote Nov. 25. He expects the index to advance 7.9 percent this year. The dividend payout for companies in the index climbed above the yield on the 10-year U.S. Treasury note for the first time in 50 years in November and is now 3 percent. ThatÃ¢â¬â¢s 0.67 percentage point more than the yield on 10-year notes, data compiled by Bloomberg show. Ã¢â¬ËStaging a RecoveryÃ¢â¬â¢ JPMorganÃ¢â¬â¢s Thomas Lee says the 47 percent drop in gasoline prices last year to an average $1.62 a gallon, according to AAA, combined with ObamaÃ¢â¬â¢s plan for stimulating growth may revive consumer spending in the second half of 2009. Retailers are among the New York-based bankÃ¢â¬â¢s Ã¢â¬Åtop picksÃ¢â¬Â for 2009. The S&P 500 Retailing Index trades at 12.5 times the earnings of its 27 companies, about half the average ratio this decade.