One of a handful of Wall Street strategists who anticipated this year’s rebound in U.S. stocks is raising his expectations for how high the market might climb during the coming months.
“We are raising our target price for the S&P 500 by 5% from our 4,200 prior midpoint view to 4,400 by 2Q/3Q 2023,” said Barry Bannister, chief equity strategist at Stifel, in a note to clients that was shared with MarketWatch on Monday. That call was out of sync with the Wall Street consensus at the time, which called for U.S. stocks to continue sinking during the first quarter before rebounding later in the year.
Bannister based his outlook on the expectation that inflation in the U.S. will slow sharply in the months ahead, with core PCE slowing to between 2.6% and 3.6%. That is still higher than the rock-bottom levels from the decade that followed the financial crisis of 2008, Bannister and his team pointed out. Traders will receive an update on the pace of inflation last month when the consumer-price index for April is released on Wednesday.
So long as U.S. corporations avoid an earnings recession — that is, two straight quarters of contraction in the S&P 500’s earnings per share — Bannister expects stocks could continue to power higher, driven in part by real yields, which remain low compared with their levels before the financial crisis.