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(Bloomberg) — Wall Street’s most-bullish strategist is tempering his outlook for the stock market, citing persistent inflationary pressures and geopolitical turmoil.
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Oppenheimer’s John Stoltzfus now sees the S&P 500 finishing the year at 4,800, compared with a previous forecast of 5,330. His new prediction still implies a 24% rally from current levels. The gauge climbed about 1% at 10:28 a.m. in New York Thursday.
While the firm’s chief investment strategist initially expected the US benchmark to withstand the Federal Reserve’s hawkish pivot, he did not foresee the war in Ukraine and China’s stringent lockdowns as significant headwinds.
Those factors alongside “higher and stickier inflation added enough uncertainty and soured sentiment to negatively challenge equity-market performance to a greater extent than we had earlier expected,” Stoltzfus wrote in a note to clients.
With the S&P 500 down about 20% from its January record, Wall Street’s prognosticators have been forced to catch up. Over the past month, at least four analysts tracked by Bloomberg have cut their year-end targets, including Credit Suisse Group AG’s Jonathan Golub and Citigroup Inc.’s Scott Chronert.
Yet they are far from being pessimists. Stoltzfus said US growth should remain well-supported by consumer demand, business investment and government spending.
“The Fed is likely not to be as aggressive in its trimming of accommodation as some may expect,” Stoltzfus said in emailed comments. “We don’t believe the Fed wants to push the economy into a recession. We do believe however that the first order of the day is to end ‘free money’ and move towards a more normalized interest rate and inflation regime.”
(Adds trading.)
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