But the rally could falter soon, as prices may not be able to ease to the Fed's 2% inflation target without additional rate hikes, the firm said.
"The fly in that optimistic ointment is the threat that a strong economy and declining inflation are mutually incompatible, and the Fed will be forced to keep raising rates in this scenario. Markets have gotten the 'peak Fed' call wrong 3 times so far; a fourth unforced error is not out of the question," DataTrek co-founder Nicholas Colas said.
Colas predicted that the rally in stocks will continue through the end of June, though the market could face a conundrum in the third quarter as inflation and Fed rate expectations become repriced.
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