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The S&P 500 could rally 15% from current levels in the next 6 months, according to Stifel strategists.
Peak Fed hawkishness and falling inflation expectations are likely to fuel a rally in U.S. stocks, strategists wrote to clients in a note. The strategists don’t expect to see new signals from the Fed on further tightening beyond what is already suggested.
They also argue that inflation can’t fall, nor the S&P 500 “can rise meaningfully without the stock market also out-performing the commodity index.” Wages, which are “critical”, are topping.
“Our view is that in the next 6 months inflation cools and a recession is delayed (to ~3Q2023E), lifting the S&P 500 to 4,300 and favoring specific Cyclicals,” the strategists added.
Long-term, strategists see the S&P 500 flat for the 2021-2031 time period, characterized by value outperformance.
“The “tell” for this scenario will be if commodities are in a secular bull market, with higher highs and higher lows (buy-the dips) for 10 years, the only universally common feature of S&P 500 secular bear markets,” they concluded.
