- Stocks could take off this year as the US delays a recession, Fundstrat’s Mark Newton said.
- Newton pointed to falling interest rate expectations, which are a “big positive” for the market.
- He predicted the S&P 500 could finish 2023 at 4,500, implying a 13% increase from current levels.
A recession could be postponed for years, and the stock market is poised for a big bounce after it works through the current wave of banking turmoil, according to Fundstrat’s global head of technical strategy Mark Newton.
Though investors are still grappling with fears of a banking crisis, he reiterated his bullish view on stocks in an interview with CNBC on Monday. While the market could weather another tough four to six months if financial stocks don’t see a sharp rebound soon, he forecasted the S&P 500 could hit 4,500 by year-end, implying a 13% jump from current levels.
“My thinking is we’re going to have a pretty decent bounce in the next couple years before potentially we see a late-decade, potentially a pullback. I think that the recession potentially could be postponed. It probably can’t be avoided completely, but for this year and next year I’m clearly in the no landing [camp],” Newton said.
His view is contrary to other commentators, who say the recent collapse of Silicon Valley Bank has raised the odds of a recession this year. Banking troubles naturally slow down the economy, according to DataTrek co-founder Nicholas Colas, who told Insider he didn’t see the US making it through the next 12 months without tipping into a downturn.
But Newton expects Fed officials to dial back interest rates in order to avoid putting pressure on the banking system. Lower rates are a “big positive” for stocks, while rising interest rates weighed down the S&P 500 heavily in 2022.
That momentum can already be seen in tech and growth stocks, with the tech-heavy Nasdaq Composite surging 13% from the start of the year as investors anticipate lower interest rates ahead.
“If you see a broad-based rally in technology, yes, that does have the potential to carry markets higher or keep them resilient in the face of bad news, particularly when everyone is pessimistic,” Newton added.
Central bankers are expected to deliver their next decision on Wednesday. Markets have priced in an 82% chance the Fed lifts rates by 25 basis points, and an 18% chance the Fed pauses its tightening cycle, according to the CME FedWatch tool.