The stock market is blooming against all odds, as it faces Fed rate hikes, geopolitical tensions and a slowdown in consumer spending.

But indexes are rallying—and Wall Street can’t quite believe it.

With the S&P 500 up 20% this year even the most pessimistic voices in the industry are being forced to revise upwards—including the staunchest of bears, Morgan Stanley’s Mike Wilson.

Wilson, ranked the best portfolio strategist in the 2022 Institutional Investor survey, earlier warned that stocks had climbed into the ‘death zone’ and were due a sharp decline. In May, he also warned investors away from being drawn in by the rising S&P 500 figures, insisting the growth isn’t a sign of a bull market.

But even Wilson has had to revise his outlook, writing in a note to clients on Monday that 2023 is so far following the trajectory of 2019—one of the best years in a decade, where stocks rallied 29%.

“The data we have today suggests to us that we are in a policy-driven, late-cycle rally,” Wilson wrote in the note seen by Fortune. “In our view, the positive policy impact has been supported by a very strong fiscal impulse, a still supportive global liquidity backdrop and optimism that the Fed can now transition to easier monetary policy given the falling inflation data.”

Morgan Stanley’s chief investment officer pointed out that although the conditions differ between 2019 and 2023, the past could give an insight into how far the markets could rise: “The 2019 analogy, in and of itself, suggests more index level upside from here, though we’d note that the Fed was already cutting rates for a good portion of 2019, and the market multiple is already close to one turn higher than where it peaked during that period.”

However Wilson, one of a minority of Wall Street strategists to see last year’s equities rout coming, doesn’t subscribe to the idea that the economy has entered a new cyclical upturn.

To be convinced, he wrote, he would need to see “a broader swath of business cycle indicators inflect higher, breadth improve and front-end rates come down.”

And although Wilson has acknowledged his calls for 2023 were off-track, he’s still expecting the S&P to drop before the end of the year—chalking in a year-end target of 3,900, a 15% drop from its current trade at approximately 4,590.

These shifts in optimism are trickling down to American households, Wilson also believes, writing that consumers are increasingly “optimistic” thanks to the resilient stock and labour markets.

Markets are bound for new highs

Wilson isn’t the only economist with some new-found confidence—he’s been echoed by Wharton professor Jeremy Siegel.

Writing in his weekly letter on investment analysis site Wisdom Tree, Professor Siegel said he’d lowered his possibility of a recession to below 50%, adding: “If forced to give a probability, perhaps I would say 30%.”

Professor Siegel wrote the 2.4% GDP figure reported for the second quarter was “certainly a surprise,” continuing: “I don’t know any economist who thought it would be that high.”

Consumer sentiment is still strong, he wrote, having previously highlighted that ‘YOLO’ spenders were propping up the economy. The combination of factors suggests that although the U.S. doesn’t have a “runaway booming economy, but the recent reports indicate a strong economy.”

The outlook is “good” for stocks and earnings, he added, saying that “for now, it looks like the markets are bound to make new highs.”

He did have a warning for the technology sector, however, explaining: “Tech stocks are still expensive and could react to the higher interest rates. But it’s a momentum trade at the moment. Earnings certainly have come in very well this quarter.”

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