(Yahoo! Finance) - Stocks stalled out last week following their post-election pop, but strategists, including Rick Rieder of BlackRock and John Stoltzfus of Oppenheimer, are still longer-term bulls.
“There are no natural sellers,” Rieder said at the recent Yahoo Finance Invest conference. He’s the chief investment officer of fixed income for the asset management giant, and his remit also includes overseeing $150 billion of equities.
Rieder said there are two forces supporting equities.
First, earnings are growing. “I think the multiples are high. But if you think the E in PE [price-earnings ratio] is going to be significantly higher, you get that multiple to a reasonable level.”
Second, “The technicals are crazy for equities,” Rieder said. That’s in part because of the lack of sellers, as the massive amount of dollars in 401(k)s allocated to stocks, plus companies buying back their own shares, provides lots of buyers.
As for Stoltzfus, the chief investment strategist at Oppenheimer Asset Management, he just raised his year-end 2024 target for the S&P 500 (^GSPC) for the third time. He was one of the most bullish strategists on the Street coming into the year, and he now sees the index closing out at 6,200. (He has yet to set his forecast for 2025).
Stoltzfus told Yahoo Finance in an interview that stocks, the economy, and business growth have continued to defy expectations.
"Second and third quarter earnings growth and revenue growth have outperformed consensus expectations," he said. "We were looking for much less growth. And then the Fed has been remarkably successful [at averting a recession]. The consumer and jobs have all proven resilient, even if slowing somewhat is a result of the effects of the Fed going after inflation for over two, two and a half years."
Of course, that’s not even factoring in the fiscal policy of the incoming Trump administration, which many strategists expect to help further juice growth. One of them is Ed Yardeni, who recently set a target of 7,000 for the S&P 500 for the end of 2025 and said the election had reignited “animal spirits” in the market.
“I think we're just seeing a more pro-business administration coming in that undoubtedly will cut taxes,” Yardeni said in an interview with Yahoo Finance. “And not only for corporations but also for individuals. Lots of various kinds of tax cuts have been discussed, and in addition to that, a lot of deregulation. So we're upping our estimates for what profit margins are going to be doing over the next couple of years.”
Rieder and Stoltzfus agree that a far-off potential risk for stocks and the economy more broadly could be the ballooning of the US deficit and debt, and a possible resultant buyers' strike in the Treasury market that could send yields higher.
However, markets aren’t concerned at the moment.
“I think markets tend to react to the shark closest to the boat,” Rieder said. “The shark on the debt dynamic is not going to be next to the boat in January or February, but it is going to get next to the boat sometime. I don't know if it's the latter part of 2025 or the beginning of 2026 unless they address the size of the spending dynamics, the amount of debt we're issuing, and, then obviously, inflation relative to that.”
Last week showed euphoria was dampened but perhaps not eliminated. The S&P 500 had its worst week since September, falling 2.1%. That also means it closed 2.1% below its record high of 6,001.35, a level that could be quickly surpassed if the “animal spirits” that Yardeni invoked reassert themselves.
By Julie Hyman - Host
