Jonathan Golub is getting more bullish on U.S. stocks as the market breaks out of a five-month slumber.
The chief U.S. equity strategist at Credit Suisse boosted his year-end forecast for the S&P 500 by 100 points to 3,025, a level that represents a 7 percent increase from Friday’s close.
Growth in corporate profits is slowing more than expected, but improving sentiment means investors will be willing to pay a higher multiple for stocks, Golub says.
“Investors have not fully re-risked portfolios following 4Q’s turbulence -- despite a sharp decline in volatility and spreads -- and ... valuations will drift higher as they do so,” Golub said in a note to clients Monday. “Receding risks drive market higher,” he added, referring to a less hawkish Federal Reserve and a potential U.S.-China trade deal.
The strategist reduced his 2019 earnings estimates for S&P 500 to $170 a share from $174, citing weakness from Apple Inc. and energy producers. His new target put him as the third-most bullish among strategists tracked by Bloomberg, behind Deutsche Bank’s Binky Chadha and Ben Laidler at HSBC.
Stocks have risen in all but two weeks since Christmas, with the S&P 500 rallying 20 percent from its December low. Last week, the index closed above 2,815 for the first since October, clearing a chart hurdle that had halted the market’s advance at least four times over the stretch.
But even as stocks keep going higher, investors have been slow to embrace equities. Before last week, money had left stock funds and equity exposures at hedge funds remained subdued. The lack of optimism is one reason why bulls like Golub say there is more upside for the 10-year-old bull market.
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