According to Oppenheimer, the S&P 500 could experience an 18% surge by the end of the year.
This projection is based on the strength of the economy and the possible conclusion of the Fed’s rate hike cycle.
Investors should not be overly concerned with 5% Treasury yields, as this rate is normal relative to past periods.
Oppenheimer’s chief investment strategist, John Stoltzfus, believes that the S&P 500 is on track for a significant rally by year-end. This forecast is fueled by the expectation that the Federal Reserve will scale back its efforts to combat inflation.
Stoltzfus reaffirmed his forecast of a S&P 500 price target of 4,900 during an interview with CNBC. Achieving this target would result in an 18% surge in the benchmark index in just over two months. Stoltzfus emphasized that this projection is contingent on the Fed ending its rate hike cycle while remaining attentive to the impact of its policies on the economy.
In recent months, the Fed has aggressively raised interest rates to combat inflation, with the current fed funds rate ranging from 5.25% to 5.5%. This has raised concerns that the Fed’s aggressive policies could push the US into a recession. However, the economy has demonstrated resilience, with third-quarter GDP growth reaching 4.9%.
Despite some disappointing results from major tech firms, corporate earnings have generally performed well. According to FactSet data, 73% of S&P 500 companies that reported third-quarter earnings have exceeded analysts’ estimates.
The recent sell-off in stocks can be attributed to concerns about higher Treasury yields, including the 10-year US Treasury yield reaching 5% for the first time since 2007. However, Stoltzfus reassures investors that 4%-5% interest rates are historically normal, as rates have been unusually low for the past 15 years.
Investors anticipate that interest rates could be lowered by mid-next year, with an 80% chance priced in by the market. This expectation could be bullish for stocks, especially considering the negative impact of rate hikes on the S&P 500 in 2022.
Despite growing market concerns, Stoltzfus has consistently maintained a bullish outlook. In 2022, he initially predicted a surge in the S&P 500 to 5,330, but subsequently revised down his target multiple times throughout the year.
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