S&P 500 Projections: Wall Street’s Most Optimistic Strategist’s View

S&P 500 Energy Sector Gains Favor, as Predicted by Oppenheimer’s Stoltzfus

In the midst of recent turbulence in the U.S. stock market, Oppenheimer’s Chief Investment Strategist, John Stoltzfus, maintains his optimism about the S&P 500 hitting record highs this year. Back in late July, Stoltzfus boldly projected that the S&P 500 would soar above 4,900 by the close of 2023, making it the most optimistic target among 20 Wall Street firms surveyed by MarketWatch in August.

This forecast implies that the S&P 500 will surpass its previous record high of 4,796, achieved on January 3, 2022, by year-end. However, the path to this record may not be without its share of challenges.

Stoltzfus and his team at Oppenheimer have noted that market bullishness remains high while the Federal Reserve has yet to reach its inflation target. They caution investors to temper their enthusiasm for a prolonged period of low interest rates or even a rate cut. Despite expectations that the Fed is nearing the end of its current interest-rate hiking cycle, concerns persist. Strong economic data and rising oil prices have raised worries that sticky inflation could lead to sustained higher borrowing costs.

Investors should remain vigilant, according to Stoltzfus, even as the Fed appears to be approaching the end of its current rate-hike cycle. They believe that persistently high prices in various sectors, including food, services, and energy, warrant the Fed’s continued attention. As such, Stoltzfus and his team foresee the possibility of one more rate hike this year and potentially another in the next.

However, Stoltzfus does not view these current headwinds as insurmountable obstacles that would prevent the S&P 500 from reaching his team’s ambitious target.

Market participants eagerly await this month’s inflation report, which is expected to shed light on the Federal Reserve’s stance on inflation. The headline component of the consumer-price index is anticipated to rise to 0.6% in August from July’s 0.2%, while the core measure, which excludes volatile food and fuel costs, is expected to see a modest increase of 0.2% from the previous month.

Furthermore, Stoltzfus acknowledges that the Wall Street volatility index, known as the CBOE Volatility Index (VIX), indicates the likelihood of “some choppiness” in the stock market in the near term. The VIX, currently at 13.82, hovers near its 12-month low and trades well below its one-year and two-year averages.

Despite these challenges, Stoltzfus and his team encourage investors to seize opportunities during market weakness. They see promise in the S&P 500 Energy Sector (XX:SP500.10), particularly as policymakers in the U.S. and around the world strive to combat inflation and nurture economic growth. An improved economic outlook, combined with fiscal stimulus from domestic infrastructure projects and chip manufacturing initiatives, could enhance the profitability of the energy sector into 2024.

Year-to-date data shows that the Energy Select Sector SPDR Fund (XLE), representing the energy sector within the S&P 500, has gained 3.9%. In contrast, the price of West Texas Intermediate crude oil has risen by 8.5%. While oil futures reached their peak for the year following unexpected output cut extensions by Russia and Saudi Arabia, they later settled at slightly lower levels.

Stoltzfus’s prediction from late July suggested that the S&P 500 would surpass its record high by the close of 2023, with a year-end target of 4,900, representing a 9.2% increase from its current level.

On Monday, U.S. equities showed positive momentum, with the technology sector leading the way. The Nasdaq Composite climbed by 1.1%, while the S&P 500 advanced by 0.7%. The Dow Jones Industrial Average closed 0.3% higher.

Please note that this summary is not financial advice; it is a simplified overview of a complex financial news article. Consult with a financial advisor for investment decisions.