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The S&P 500 index could jump another 13% by the end of the year in a bullish scenario, according to BMO’s top strategist.
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Better-than-expected fourth-quarter tech and banking earnings would lift the benchmark in this scenario, Brian Belski said.
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Tech stocks have soared this year, but banks have suffered since SVB collapsed in March.
The S&P 500 could jump another 13% to a record high by the end of the year on better-than-expected earnings in technology and banking stocks, according to BMO’s chief investment officer.
Brian Belski said on Friday that his base case would see the benchmark index hover around its current level for the rest of the year – but presented a more bullish scenario where fourth-quarter earnings surprises push it past its current record level of just under 4,800 points.
“Our bullish case is 5,050, which signifies new price highs on the S&P 500,” Belski, who is chief investment strategist at BMO Capital Markets, told CNBC’s “Squawk on the Street.”
“Which we think could lead to surprising earnings growth, especially in the fourth quarter,” he added, citing technology, communications and financials as the three sectors that could post better-than-expected results. .
Financial stocks grabbed headlines for the wrong reasons earlier this year when the collapse of Silicon Valley Bank in March sparked a crisis for regional lenders.
But technology and communications stocks fared much better, with the so-called ‘Magnificent Seven’ all racking up stellar returns and iShares’ Core S&P 500 UCITS exchange-traded fund trailing the latter of the two. sectors, up 18% per year. nowadays.
Belski’s price target of 5,050 points would see the S&P 500 continue its stellar run from the first half of 2023, with the gauge up 16% already this year.
Many analysts have pointed to the rise of AI as the main driver of the stock market rally – but Belski believes stocks and fixed-income assets have instead entered a “normalization phase” as the Federal Reserve reaches the end of its tightening cycle. , after offering dismal returns in 2022.
“We actually think this is all part of the normalization phase where you have 10-year Treasury bills [yields] in the 3% to 4% range, earnings growth in the high single digit range, market performance in the high single digit or low double digit range,” he told CNBC.
“It’s a very good position to have in both bonds and equities for at least the next three to five years,” Belski added.
Learn more: The AI boom propelled tech stocks to their best start to a year since 1983
Read the original article on Business Insider