Still, now may not be the time to jump into stocks, at least in the U.S. Few investors expect the market’s gains in 2014 to come close to this year’s.
Analysts at Barclays Capital expect the S&P 500 index to reach about 1,900 by the end of 2014, roughly 6 percent above its current level. Analysts at Goldman Sachs are less optimistic. They see the index closing at 1,850 by the end of 2014.
Not all parts of the market are overvalued, according to some investors. Bank stocks are among the cheapest in the S&P 500, based on the ratio of their price compared to projected profits.
“Typically financials benefit from the next stage of a bull market,” said J.J. Kinahan, chief market strategist with TD Ameritrade.
Energy and information technology stocks are also relatively inexpensive, when looking at price-to-earnings ratios. However, energy stocks have struggled due to lower oil and natural gas prices, so low stock prices may not necessarily mean they are a good value.
Blackrock’s Koesterich says investors should also look outside the U.S., particularly to emerging markets. But don’t focus on one country or continent, he said.
“Bring down your exposure to U.S. and go buy a broad international fund,” he said.