The S&P 500 will rocket 18% by year-end as the economy stays strong and the Fed ends interest rate hikes, Oppenheimer investment chief says

Stock market trader Peter Tuchman

TIMOTHY A. CLARY/Contributor through Getty Photos

  • The S&P 500 may soar one other 18% by year-end, in accordance with Oppenheimer.

  • That is as a result of the financial system is powerful and the Fed is more likely to finish its price hike cycle.

  • Whereas 5% Treasury yields have sparked concern amongst traders, that is regular in comparison with earlier eras.

The S&P 500 is due for a monster rally by the top of the yr, because the Federal Reserve appears poised to dial again its warfare on inflation, in accordance with Oppenheimer’s chief funding strategist John Stoltzfus.

In an interview with CNBC on Thursday, Stoltzfus reiterated his S&P 500 worth goal of 4,900 by the top of the yr. That factors to the benchmark index skyrocketing 18% in simply over two months, a forecast that is predicated on the Fed seemingly ending its price hike cycle.

“You have to keep in mind that after we raised that focus on, we had been anticipating that the Fed would proceed be vigilant in opposition to inflation however would stay delicate to the results of its coverage on the financial system. And it has remained so,” he stated.

Central bankers have hiked rates of interest aggressively since March 2022 to tame inflation, with the fed funds price now at 5.25%-5.5%. That has sparked fears that the Fed may push the US right into a recession with its aggressive coverage, although the financial system has stayed impressively resilient thus far, with GDP rising 4.9% within the third quarter.

Company earnings additionally look to have held up, regardless of some disappointing outcomes this week from the most important tech companies. Of the 17% of S&P 500 firms that reported third-quarter earnings final week, 73% have crushed analysts’ estimates, in accordance with FactSet information.

And although shares have bought off in latest weeks, that is largely as a consequence of fears stemming from larger Treasury yields, with the 10-year US Treasury yield just lately topping 5% for the primary time since 2007. However yields round 5% are literally pretty regular relative to historical past, Stoltzfus stated:

The 10-year yield hovering around 4%-5% is fairly normal by historical standards, Fed data shows.

The ten-year yield hovering round 4%-5% is pretty regular by historic requirements.Federal Reserve

“From a historic perspective, 4%-5% is de facto what the 10-year yield often can be like throughout regular durations,” he added, noting that rates of interest had been unusually low for the previous 15 years.

The Fed has warned that charges may keep higher-for-longer because it continues to watch inflation and the power of the financial system. Nonetheless, markets predict rate of interest cuts by mid-next yr, with traders pricing in an 80% likelihood that charges could possibly be decrease than their present stage by July 2024, in accordance with the CME FedWatch software. That could possibly be bullish for shares, contemplating that price hikes weighed the S&P 500 down closely in 2022.

Stoltzfus has been considered one of Wall Road’s most bullish forecasters, regardless of considerations brewing in markets over surging bond yields and the potential of a recession on the horizon. In 2022, he predicted the S&P 500 would surge to five,330, however then slashed that focus on a number of occasions because the yr went on.

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