Deutsche Bank goes against consensus, sees S&P 500 rallying to 4500

December 6, 2022 9:05 AM EST
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The S&P 500 could extend its third bear market rally to 4500 in the first half of the next year, according to Deutsche Bank strategists led by Marion Laboure.

While several analysts, including Bank of America’s Michael Hartnett, have called for a drop in the S&P 500 to new lows before a sharp recovery, Deutsche Bank strategists take the opposite position. They see the index racing higher, however, the bear market rally can extend much further than previously anticipated.

In the meantime, the global economy is “at a defining moment.”

“Inflation is running at multi-decade highs, central banks are pursuing their most aggressive tightening cycle in a generation, and a recession is now increasingly expected in the US and the Euro Area, including in our own street-leading forecasts… Looking forward, our view is that 2023 will be the third-worst year for global growth so far in the 21st century, behind only the pandemic year in 2020 and the aftermath of the financial crisis in 2009,” Laboure.

The bank also sees a recession coming to the States in the third quarter of 2023. However, the recession will then help inflation to come down, reaching target levels, or slightly above, not before 2024/2025.

“We also see risks that the ECB will be challenged in finding consensus to tighten policy enough to tame inflation in an environment where unemployment starts to rise. We don’t think the risks will be as great at the Fed,” the bank’s strategists added in a note.

As for Europe, strategists believe the Euro area is already in a recession.

By Senad Karaahmetovic

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Deutsche Bank, Standard & Poor's, BofA/Merrill Lynch, Senad Karaahmetovic