The market is finally catching its breath after a period of impressive gains. However, according to Yardeni Research, there is still more to come.
Record-Breaking Action on the Horizon
Both the S&P 500 and the Nasdaq Composite have just completed a remarkable three-week run. And if historical patterns are any indication, there may be more reason to celebrate. Despite the gains made this year, both indexes have yet to surpass their previous record highs.
A Focus on the S&P 500
Yardeni Research President Ed Yardeni believes that at least one of those records is within reach.
Looking at the technical aspects, on Monday, the S&P 500 closed at 4,547.38. Yardeni points out that this is precisely on the resistance line that connects the index to its previous highs in 2023 and January 2022. The levels were 4,588.96 and 4,796.56 respectively.
Yardeni suggests that the market could easily reach this year’s high, which falls just short of their year-end target of 4,600. By surpassing the resistance line, matching the record high could be attainable either by the end of this year or early next year.
A Promising Outlook
Recent data aligns with Yardeni’s optimistic view of a soft landing for the market. Additionally, the rapid climb in recent weeks supports the notion of a tech-driven “Roaring 20s” scenario. Regardless of the outcome, investors have had reason to celebrate lately. If inflation continues to decline, it is likely that there will no longer be headwinds in the form of interest rate increases.
The Soft Landing: A Cause for Gratitude
While Yardeni isn’t the only one that thinks the U.S. has nailed a soft landing, other analysts aren’t as optimistic.
A Solved Mystery
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.
Trading at Fair Value
According to 22V Research President Dennis DeBusschere, the problem lies in the fact 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.
He believes that the S&P 500 will not experience significant growth from its current level. In fact, he suggests that the fourth-quarter S&P 500 rally call is close to running its course at the index level.
DeBusschere’s perspective aligns with others on Wall Street who also anticipate the index to be rangebound in the coming months and even into next year. This prediction is driven by sticky higher interest rates and the substantial stock market gains seen in 2023, which have led to inflated stock prices.
Gratitude Amidst Uncertainty
With varying predictions about the outcome of a soft landing, perhaps the real takeaway here is that we should simply be grateful that we aren’t currently debating what stocks would do in a hard landing or economic downturn.
As we navigate these uncertain times, let’s focus on appreciating the relative stability and positive performance of the U.S. economy.