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S&P 500 will return to the 4,300 level in six months: Stifel

S&P 500 has been in a downtrend since the start of this year but the next six months will likely be a different story, according to the strategists at Stifel.  

S&P 500 has a 15% upside

They expect the Wall Street index to be trading at around the 4,300 level by the end of April 2023. That suggests a 15% upside from here – fairly encouraging to consider investing in the benchmark index.

Stifel is convinced the consumer prices will slow down in the coming months even though they were reported “up” for September just last week. It also doesn’t expect the central bank to tighten beyond what has been already signalled.

Recession is farther away

Most importantly, strategists at Stifel are not expecting the U.S. economy to sink into a recession before the third quarter of 2023. Between now and then, they argued, there’s plenty of time for the S&P 500 to surprise to the upside.

Our view is that in the next six months inflation cools and a recession is delayed to 3Q2023E, lifting the S&P 500 to 4,300 and favouring specific cyclicals.

That’s an interesting call considering the GDP shrank in the first two quarters of 2022 as Invezz reported here. Data for the third quarter is expected later this week.

Morgan Stanley strategist agrees

Interestingly, Mike Wilson – Chief U.S. Equity Strategist at Morgan Stanley shares the enthusiasm as well. In a separate note this morning, he also talked of a possibility that the benchmark index should return to the 4,300 level that was last seen in mid-August.  

He expects a pullback in bond yields to clear way for a tactical rally.

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