The roller-coaster stock market might just be approaching that golden dip that savvy investors dream of. Mark Newton, Fundstrat’s guru of global technical strategy, believes we’re on the brink of an enticing buying juncture.
In a recent tête-à-tête on CNBC, Newton dished out some predictions: he sees the S&P 500 perhaps nudging downwards to 4,200. This translates to a 4% drop from where we stand now. A few factors, like the momentary market jitters due to the unfortunate events in Israel, have added to this bearish vibe.
However, here’s the twist – Newton doesn’t see this dip as the beginning of the end. On the contrary, he interprets this as a short-lived hiccup. He reminds us, “Historically, market fluctuations during military confrontations tend to be ephemeral.” And the bigger picture? The fundamentals for the longer-term market trajectory remain robust, war notwithstanding.
“There’s a confluence of factors – from the prevalent pessimism to the upcoming seasonal perks of Q4 – which makes us confident that we’re glimpsing a bottoming out. This might just be the phase for risk assets to shine,” says Newton, setting a decidedly optimistic tone.
One of the pivotal gears driving the market machinery is the Federal Reserve’s decisions on rate hikes. The general market sentiment? The Fed might soon hang up its rate-hiking boots. When interest rates hit their zenith and then start to recede, it can rev up economic growth. Newton believes sectors like tech could particularly thrive in such a climate.
Yes, the specters of inflation and a potential recession are lurking around. But Newton offers a fresh perspective, suggesting that the remnants of inflationary pressure will likely auto-correct. This sentiment is backed by several economists who believe that the effects of past rate hikes will gradually permeate the real economy, potentially tempering prices without further hikes.
Newton also adds another feather to his optimistic cap, emphasizing the vigorous demand energizing both the housing and labor markets, which could stave off any imminent downturn.
It’s worth noting that Fundstrat has, in the past, placed its bets on diminishing inflation coupled with spirited economic growth to fuel a robust stock rally. The firm’s Tom Lee had even foreseen the S&P 500 reaching an unprecedented pinnacle in 2023. Sure, his prediction for 2022 didn’t hit the bullseye, with the index closing 20% lower. But as every seasoned investor knows, the game’s all about reading the signs and playing your cards right. And right now, those signs might just be pointing to a promising horizon for the stock market.