Expecting the economy and corporate profits to continue to do well next year, although at a slower pace than in 2005, Standard & Poor's of New York is predicting that the S&P 500 will return 8.5% in 2006 and that the gross domestic product will rise 3.4%.

Over the past five years, the S&P 500 has delivered a negative 1.02%, but large-cap growth stocks have delivered a negative 3.61%. The unimpressive performance of large-caps is a result of the massive progress in the bubble years of the 90s. From 1994 to 1999, the S&P 500 rose 220%, which is 3.5 times the growth of operating earnings in that period, according to S&P. Although large-cap investors have not had much reason for celebration over the past five years, S&P believes higher-quality stocks will outperform the market in the coming year.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.