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Stifel strategist Barry B. Bannister is confident the S&P 500 could stage a relief rally in Q3. He sees the benchmark U.S. stock index trading as high as 4,200 in this quarter.
His “major view” is that investors should switch from Defensives to Cyclical Growth, and sectors like Software, Semiconductors, Media & Entertainment, Technology Hardware, and Retail.
“We see a decline for oil, inflation and rate futures as well as avoidance of significant 2H22 S&P 500 EPS concerns supporting a P/E ratio-led rally in advance of our view that the Federal Reserve slows rate hikes and pauses rates by late-2022,” Bannister wrote in a research note to clients.
The strategist reiterated Stifel’s position that the U.S. is unlikely to enter into recession in the next 6-9 months. He added that “recession fear is over-done.”
On red-hot inflation, Bannister argues that “the CPI y/y likely peaked with Goods & Energy inflation relief soon,” which should pave the way for the Fed to slow rate hikes and pauses rates by late-2022.
“Although we believe a Secular Bear Market began in 2022, those feature trading opportunities for a decade, such as the one we now see,” the analyst concluded.
The S&P 500 closed at 3,863.16 on Friday.
