S&P 500 to hit 4,300 in the coming weeks - Stifel

Stifel’s market strategist Barry Bannister reaffirmed his bullish stance and expectations that the S&P 500 will continue moving higher and could hit 4,300 by spring 2023.

Last October, Bannister came out with an optimistic projection: S&P 500 will hit 4,300 in the next 6 months on the back of the slowing inflation and peak Fed hawkishness.

“We foresee sharply lower inflation, a Fed pause in 2Q23, no recognizable 1H23 recession (or EPS recession) and improved global dollar liquidity, the combined result of which should be a lower 10Y Treasury TIPS real yield and a P/E-expansion lift to 4,300 for the S&P 500 by 2Q23 led by Cyclical Growth and Cyclical Value,” Bannister wrote in a client note.

While being bullish on stocks for the first half of the year, Bannister sees rising risks in the back end of 2023.

“The (overly) telegraphed slowdown may coalesce around mid-2023 just as investor confidence is rising, and although we see inflation falling through 3Q23 the inflation rate may turn up again (i.e., oil, China) late this year, which would alarm the Fed. A rapid term premium adjustment for the 10Y yield or a widening of corporate spreads could then cause a sell-off later in 2H23 as the loosening of financial conditions in 1H23 proves temporary,” Bannister added.

Net-net, Stifel is modestly below the Street consensus for the S&P 500 1H23 EPS but “well below” consensus for 2H23.

S&P 500 closed at 4,119.21 yesterday, climbing 1.05% on the day after a more dovish-than-expected FOMC statement and Fed Chair Powell’s press conference. The index is up a further 19 points in pre-market Thursday.

By Senad Karaahmetovic

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