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Investment Roundtable: The road to profits in 2015

Adam Shell and Matt Krantz
USA TODAY
The annual USA TODAY panelists: Dan Chung, CEO and Chief Investment Officer at Alger; Savita Subramanian, Head of U.S. Equity & Quantitative Strategy at BofA Merrill Lynch;  Rick Rieder, Chief Investment Officer of Fundamental Fixed Income at BlackRock; and Rupal Bhansali, Chief Investment Officer of International Equities at Ariel Investments in New York City, on December 5, 2014.

Distrustful investors will be pleasantly surprised when they find out there is even more money to be made in stocks next year. That was the clear and unanimous message of top Wall Street money managers and strategists who gathered for the 2015 USA TODAY Investment Roundtable.

The Standard & Poor's 500-stock index is up 10% in 2014. It has tripled in value since the bull market began in 2009. And outside of some pockets, such as the Nasdaq composite which still hasn't topped its 2000 peak, the market has been cruising to new record highs on a regular basis.

And individual investors, who are still fuming over the financial crisis, have stayed on the sidelines, missing out on a big chunk of the gains.

This is "one of the most hated bull markets in equities of all time," declares Dan Chung, CEO and chief investment officer at Alger.

Playing the stock market and winning is never easy. And 2015 brings with it a whole new set of challenges -- and potentially turbulent transitions -- that will keep investors on high alert, but which won't necessarily rule out another year of profits for the nearly six-year-old bull market.

That's the market call from the four Wall Street pros who weighed in on where financial markets are headed next year at USA TODAY's 19th annual Investment Roundtable, held on Dec. 5 in New York.

Big changes are on the way, the panelists say.

• The Federal Reserve's first interest-rate hike since 2006 is in the pipeline.

• Volatility -- code word for wild and scary price swings on Wall Street -- is expected to make a comeback.

Adding to the 2015 angst: the record-setting S&P 500, which has posted 49 record closes in 2014 and is trading near all-time highs, isn't dirt cheap anymore; in fact, the market's price-to-earnings ratio is a little bit on the expensive side, history says.

And for market skeptics who fear this is another stock market bubble that will end badly, the Nasdaq, a tech-packed stock index best known for the dot-com stock bubble that burst in early 2000, is less than 7% away from making a new historic high 15 years after its mighty fall.

It's no wonder the Investment Roundtable panelists tempered their forecasts with caveats to go along with their still-bullish prognostications. Here you will find their favorite stock picks and advice on how to make money in both the stock and bond markets in 2015.

Savita Subramanian, head of equity and quantitative strategy at BofA Merrill Lynch, is still expecting the broad S&P 500 to climb 8% from Thursday's close of 2035.33. But a mega-bull she's not.

"Valuations are a little bit fuller at this point than they were a couple of years ago," she says. "So it is a little bit less easy to be bullish on stocks."

Chung is both bullish and wary. He says 2015 will finally be the year the Nasdaq takes out its 2000 high.

But the growth fund manager also warns that the market will hit some major air pockets next year, and is susceptible to its first official 10% correction since 2011.

Investors who like to venture abroad for investment opportunities should be able to find some good foreign stocks trading at a discount to U.S. names, says Rupal Bhansali, chief investment officer at Ariel Investments.

But she also warns of market turmoil if China hits an economic soft patch or central bankers in Europe and Japan can't awaken their sleeping economies.

And while the Fed's coming rate hikes won't cause as much mayhem as some pundits say, predicts Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, he's advising bond investors to "diversify like crazy" to protect themselves from potential tumult.

More from USA TODAY's 2015 Investment Roundtable:

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