Oil will hit $90 a barrel, says Bank of America. That may be a problem for stocks.

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Rising energy costs may inflame inflationary pressures, forcing up interest rates by more than equity bulls hope.

It looks like being another positive start for stocks Thursday, after the Federal Reserve’s policy decision and accompanying comments gave investors little to be worried about, and Meta Platforms META managed to beat earnings expectations.

And there’s more. The Dow Jones Industrial Average has just recorded its longest winning streak since 1987. Meanwhile, investors are so sanguine that the S&P 500 has now gone 44 days without a closing decline of 1% or more, its best such run since January 2020, according to Jonathan Krinsky, technical strategist at BTIG. Little wonder the CBOE VIX index VIX , a gauge of expected stock market volatility, sits at just 13 or so, way off its long-run average around 20.

But Blanch is reiterating his $90 a barrel Brent price target by early 2024. “The stars are finally aligning for a run in crude oil prices over the coming quarters. From a fundamental perspective, our supply and demand balance projections continue to suggest that oil markets will tighten very substantially over the coming 18 months, so we expect global oil stocks to decline substantially over this period as a result,” he says.

Markets are pricing in a two-thirds possibility that interest rates will stay this year at the 5.25% to 5.5% range the Fed brought them to on Wednesday, according to data from the CME.

 

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