Oppenheimer strategists have lowered their year-end price target for the S&P 500 in light of the stickier inflation and geopolitical tensions over the first half of 2022.
Oppenheimer & Co.’s John Stoltzfus, chief investment strategist and one of the most bullish prognosticators on Wall Street, now expects the S&P 500
to finish the year at 4,800, after staying stridently optimistic in his previous forecast of 5,330. That indicates 24.8% upside in the index by year-end based on its closing level of 3,845 on Wednesday.
“The incursion into Ukraine by Russia and China’s lockdown of Shanghai (a city of over 25 million people) as well as of other cities in China added catalysts over the course of the first half of this year which have, along with higher and stickier inflation, added enough uncertainty and soured sentiment to negatively challenge equity market performance to a greater extent than we had earlier expected,” wrote strategists led by Stoltzfus in a client note on Wednesday.
Stoltzfus said in an interview with Bloomberg last month that he had stuck with his 5,330 target — a 40% rally from where the S&P 500 stood on June 21. The benchmark index
last week closed out its worst half-year performance since 1970 as market participants expect the Federal Reserve to continue aggressively tightening monetary policy to get a grip on the inflation, but worry the interest rates will rise to levels that cause a recession. However, Stoltzfus remains bullish.
“Even in the face of uncertainty and palpable risks of recession, our longer-term outlook for the U.S. economy and the stock market remains decidedly bullish,” the strategists said. “We believe U.S. economic fundamentals remain on solid footing. U.S. growth should remain well supported by consumer demand, business investment, and government spending.”
Other Wall Street banks have cut their S&P 500 targets for 2022. Earlier this week, Credit Suisse analysts cut their forecast by 600 points to 4,300. Citigroup last month lowered their estimate by 500 points to 4,200 points.
Minutes from the Federal Reserve’s June policy meeting showed officials have been prepared to tighten policy even further though recognizing the hawkish rate hikes could slow down the economic growth. Fed policy makers last month voted to raise their benchmark rate by 75 basis points, the largest increase since 1994. Fed Gov. Christopher Waller on Thursday said he favors another 75 basis point hike later this month, and likely another 50 basis points increase in September.
“We expect that the Fed may well be able to avoid a hard landing,” said analysts at Oppenheimer. “That said, a bumpy landing is not out of the question.”
The S&P 500 rose 0.2% on Friday morning, while the Dow Jones Industrial Average
gained nearly 86.79 points, or 0.27%, as investors processed stronger-than-expected job growth in June. The Nasdaq Composite