The Fed's policy pivot is forcing Wall Street's staunchest bears to change their views on the US.
Morgan Stanley's Mike Wilson, who has been one of the most pessimistic of sell-side strategists, said Monday that the Fed's pivot last week was "a bullish outcome" for **. piper sandler & co.Michael Kantrowitz, the most pessimistic person on the S&P 500 outlook this year, issued a statement admitting his mistake and now says it is likely to continue, and the magnitude may expand.
The acknowledgment of these usually pessimistic ** marks a turning point, after advising clients to be cautious about the US this year – even as the market surged to double-digit gains, sending major stock indices at or near all-time highs.
Heading into 2023, prognosticators have warned that rising interest rates will tip the economy into recession and erode corporate earnings, triggering a sell-off. Conversely, the labor market, consumers, and U.S. businesses performed strongly, driving the S&P 500** by about 24%.
Some strategists are still holding their guns, saying that the lagged impact of rising borrowing costs will eventually bring reality to investors. The Fed hinted last week that their rate hike campaign may be over and expects to cut rates next year, making it harder to stick to those warnings.
Kantrowits said in a note to clients on Friday"I couldn't have been more wrong about the absolute return this year. "He acknowledged that the Fed's policy pivot has a clear bullish historical precedent. "I try to keep an open mind, be in tune with history and my framework, and be willing to let go of myself and stop being stubborn. ”
After widespread mistakes this year, Wall Street strategists have become more optimistic about the outlook heading into 2024. Bank of America Corp), Deutsche Bank AG and BMO Capital Markets are among the S&P 500 index set to touch or break above 5,000 points. However, the general view of the market remains conservative, with expectations for next year averaging just over 4,800 points, implying a slight increase of around 1% next year from current levels.
Now some companies are starting from scratch again. Goldman Sachs Group IncThe S&P 500 was raised a month after setting its year-end target, with strategist D**id Kostin expecting the index to rise to 5,100 by the end of next year, nearly 9% higher than his mid-November's 4,700.
However, while Morgan Stanley's Wilson called the Fed's policy pivot "good news for **", he did not completely change his stance. He set the S&P 500 target at 4,500 points next year, which means the index will be 5% higher than Monday.
This is a bullish outcome for **, as it means that if the Fed starts to focus more on sustaining economic growth and less worrying too much about inflation all the way down to its 2% target, the likelihood of a soft landing will rise. "That's not to say that this dovish shift won't increase the risk of inflation accelerating again." ”