Optimism despite lower price targets
Various crisis scenarios influence the assessment
Rising interest rates are already priced into the market
In the first half of 2022, the American stock market had to accept the biggest price losses in a long time, for the S&P 500 it was the biggest price correction since 1970.
The broad US stock market has recently stabilized. The S&P 500 is currently at 3,966.72 points and has lost 16.77 percent since the beginning of the year (as of the closing price on July 25, 2022). However, the development in the second half of the year is assessed differently.
Evaluation by the big banks
According to MarketWatch, the experts at Citigroup are coming up with a positive forecast for the S&P 500 for the second half of the year: they see the US index at 4,200 points by the end of 2022. Although they have lowered their assessment from the end of June by 11 percent, this would mean an increase of around 6 percent compared to the closing price on June 25. Citigroup justifies the positive prognosis with the receding interest rate fears and at the same time higher than feared profits of US companies.
Credit Suisse also lowered its price target for the broad American index to 4,300 points, which is still 100 points above Citigroup’s forecast. The lowering of the target price is not due to fears of a recession, it is currently a much more slowdown in economic growth at a high level. The analysts of the major Swiss bank also emphasized the good figures from the US labor market report.
Oppenheimer’s John Stotzfus also remained bullish on US stocks. Of the experts mentioned, he gave the most optimistic price target forecast for the S&P 500 with 4,800 points. According to MarketWatch, the investment strategist justified this with the currently risky situation on the stock market, but the solid basis of the US economy.
Morgan Stanley CIO Mike Wilson told CNBC that the current bear market will end very quickly and the bear market will bottom out. This is due to the rapid pace of the business cycle: recession is followed by V-shaped recovery, aided by Federal Reserve timing and high employment. “So we’re accelerating through this cycle right now, just like we’ve seen in previous cycles. And that’s good news. Because it means the end of this bear market is going to come very quickly, it’s going to be painful, but it will.” go fast,” says Wilson.
The chief economist at Commerzbank, Jrg Krmer, sees the US stock market in a difficult situation because the Fed has to further tighten its interest rate policy in view of the high inflation. This in turn will increase fears of a recession, since in the past three quarters of all interest rate hike cycles have led to a contraction of the economy.
The second semester
With the “Midterms” in November, US President Joe Biden will be put to the test in the USA: If the Democrats lose the elections, the governing party will find it difficult to get the necessary majorities for domestic political measures at federal level for the rest of the term. This prompts numerous experts to adopt a more defensive strategy in the stock market.
In view of the many reasons for the current crisis, the optimistic forecast made by many experts may come as a surprise. However, some of the rate hikes have already been priced in on the market and there are hopes that a recession can be avoided or will take a mild course. The stock market could thus bottom out in the second half of the year and tackle the banks’ price targets. The most important factor remains the monetary policy the US Federal Reserve.
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