An unstoppable climb in US equities this year is forcing the hand of even the most pessimistic sell-side strategist on Wall Street.
(Bloomberg) — An unstoppable climb in US equities this year is forcing the hand of even the most pessimistic sell-side strategist on Wall Street.
Piper Sandler & Co.’s Michael Kantrowitz, who had the gloomiest outlook for US stocks among market prognosticators, has raised his year-end target on the S&P 500 Index — but to a level that still reflects a 15% to 20% drop before the end of 2023.
The firm’s chief investment strategist now sees the US equity benchmark ending the year between 3,600 and 3,800, compared to his previous call of 3,225, the lowest of peers tracked by Bloomberg. The gauge closed at 4,534.87 on Thursday afternoon in New York.
“As we think about where the S&P 500 will end in 2023, the year-to-date move makes it difficult for us to continue justifying our year-end target that we published back in January as large-cap market indices have appreciated a lot year-to-date,” he wrote in a note to clients Thursday.
Kantrowitz clarified that his view on US stocks is a reflection of what has already occurred rather than a change in his position on the asset class, only adjusting the range because a more sizeable drop of greater than 30% previously estimated seems unlikely in the next six months.
A disconnect between valuations and earnings and a rebound in recession fears are likely to trigger a selloff in Kantrowitz’s view, while risks to his bearish position include rising valuations that offset earnings declines and heightened optimism around a soft landing if the labor market continues to hold up.
US stocks were under pressure Thursday after disappointing earnings from technology bellwethers including Tesla Inc. and Netflix Inc. Still, US equities remain on pace for a weekly gain and for a fifth straight winning month as signs of cooling price pressures across world economies buoyed sentiment.
The S&P 500’s 18% surge this year has spurred a wave of year-end target revisions on Wall Street from names including Bank of America Corp. and Goldman Sachs Group Inc. Credit Suisse Group AG’s chief US equity strategist Jonathan Golub was the latest to swing his outlook higher, changing his S&P 500 call Wednesday to 4,700 from 4,050 previously.
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