The S&P 500 is set to notch a new all-time high by mid-2024, according to a JPMorgan strategist.
That’s as the Federal Reserve is likely done with rate hikes, AJ Oden told CNBC.
A new S&P 500 record implies at least a 12% increase from current levels.
The S&P 500 is set to notch a new record next year, as the Federal Reserve is likely done hiking interest rates, according to JPMorgan Wealth Management global investment strategist AJ Oden.
He said the bank’s strategists were expecting the S&P 500 to touch a new high in mid-2024. That implies at least a 12% rally from current levels to top the current all-time record of 4,796 from January 2022.
That’s largely because JPMorgan expects the Fed to soon pivot to rate cuts, which is a bullish factor for stocks.
After central bankers raised interest rates aggressively over the past year to lower inflation, Fed officials are now sounding more optimistic on the economy, Oden noted.
He pointed to the Fed’s latest Summary of Economic Projections, where Personal Consumption Expenditures inflation — the Fed’s preferred inflation measure — is forecasted to cool down to 2% by 2026.
“If we look back to the Fed meeting and their SEP, it does seem more like a soft-landing is very much in play for them,” Oden said in an interview with CNBC on Tuesday. “It does seem like a Goldilocks scenario when you look at the SEP.”
Markets, meanwhile, have priced in a 44% chance that rates will be lower than their current level by June 2024, according to the CME FedWatch tool.
“That is the soft-landing base case,” he later added of his stock market forecast. “At some point you think the Fed is going to pivot, and the market will rally from there.”
A rally stemming from future rate cuts will also be helped along by the strong US consumer, Oden said. Though financial conditions have tightened significantly over the past year, consumer spending has remained robust, and he said 88% of consumer discretionary stocks in the S&P 500 are “poised to perform quite well.”
Those views run contrary to more bearish stock market forecasters, who say a recession is imminent as inflation potentially rebounds and the Fed keeps interest rates in restrictive territory.
Investors have been jittery since Fed Chair Jerome Powell warned interest rates could stay higher-for-longer at the Fed’s September policy meeting, which sparked a sell-off in equities while bond yields surged.
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