The market is taking a breather Tuesday, and it has certainly earned the break after its recent gains. But Yardeni Research sees more record-breaking action to come.
The
S&P 500
and the
Nasdaq Composite
just closed out a banner three-week period on Friday, and historical patterns suggest the party can keep going. Nonetheless, for all of this year’s gains, both indexes remain below their previous record highs.
However Yardeni Research President Ed Yardeni says at least one of those records could be in the crosshairs.
At least it appears so on a technical basis. On Monday, the S&P 500 closed at 4,547.38, which Yardeni notes is directly on the resistance line that connects the index to its 2023 high of 4,588.96, notched on July 31, and its January 2022 all-time high of 4,796.56.
“It could easily rise to this year’s high, which is just shy of our 4,600 year-end target by vaulting over the resistance line,” he writes. “With the benefit of hindsight, our year-end target might be too conservative. A move up to match the record high is conceivable either by year-end or sometime early next year.”
Recent data points dovetail with his soft-landing scenario, Yardeni writes. Plus, the market’s swift rise in recent weeks lends credence to the theory that we’re in for a tech-fueled Roaring 20s situation. Either way, bulls have been celebrating recently, and if inflation continues to recede, a halt to interest-rate increases—which have been a headwind for stocks—appears to be in the cards.
While Yardeni isn’t the only one that thinks the U.S. has nailed a soft landing, other analysts aren’t as optimistic.
The case of the missing recession that has dominated so much discourse in 2023 has been solved to many people’s satisfaction. A soft landing has been all but baked into equities as consumers keep spending, inflation continues to cool amid a relatively resilient labor market, and the U.S. economy remains a bright point in the world.
The problem, writes 22V Research President Dennis DeBusschere, is that this soft landing is already reflected in the S&P 500’s price: It is trading right around his soft-landing fair value estimate.
That means he doesn’t “expect the S&P 500 to move significantly higher from here…The fourth-quarter S&P 500 rally call is close to running its course at the index level.”
His take echoes others on Wall Street who also expect the index to be rangebound through the start of next year and beyond—given sticky higher interest rates and 2023’s big run that have made stocks pricier.
With such a range of predicted outcomes from a soft landing, perhaps the real takeaway is we should simply be grateful we aren’t debating what stocks would do in a hard landing or economic downturn instead.
Write to Teresa Rivas at [email protected]
Read the full article here
