ASX 6,000 here we come

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is set to rise by 11% by the end of 2017 according to one Credit Suisse analyst and end the year at 6,000.

The market’s major index is currently trading at 5,397 points, suggesting an 11.2% gain over the next 14 months or so.

That’s not an especially crazy scenario.

Earlier this year the index fell by more than 10% in just a few short months, and has since recovered almost 15% since the low of 4,706.7 was set in February 2016.

But to do it, the ASX’s Top 20 stocks are going to do most of the heavy lifting. In particular, some fund managers think the miners BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are those most likely to carry the index higher.

All the big four banks need to do is not fall too far during that time – with most analysts recognising that they face a number of mounting risks to earnings growth. Without growth, their share prices aren’t likely to head higher. The danger is that they follow the lead of Australia and New Zealand Banking Group (ASX: ANZ) and cut their dividends which could see their share prices sink.

The numero uno reason for the market to head higher according to a number of economists is rising commodity prices. Iron ore has recovered from sub-US$40 a tonne prices, oil prices have staged a similar recovery to trade above US$50 a barrel, and coking and thermal coal prices have stormed higher. Nickel has also staged a recovery and gold prices had zoomed to above US$1,300 an ounce.

Whitehaven Coal Limited (ASX: WHC) has watched its share price rocket 680% since February on the back of the soaring coal prices – coking coal is up 150% since mid-2016.

Credit Suisse equity strategist Hasan Tevfik thinks company earnings have hit bottom and will begin to rise, with mid-single digit growth in earnings per share to June 2017. That will lead to growth of around 11% by the end of the year and as much as 15% once dividends are included.

Foolish takeaway

Pay no attention or forecasts of around 10% growth. The stock market averages around 10% a year, including dividends over long periods of time. If earnings per share growth does jump, our market could end up well beyond 6,000 by Christmas 2017.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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