Despite nightmarish economic headwinds, S&P 500 performance in 2023 is surprisingly strong – up 18% year to date.
That number could be even higher, surging again to 11% by the end of the summer, according to one expert.
Morgan Stanley analyst Andrew Slimmon sees more gains in the S&P 500 , largely driven by the “top seven” stocks.
This group includes Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Tesla and Meta.
“One of the things I would point out is, I know it’s hard to believe, that while these companies have done really well so far, they’re still below where they’re going to end 2021, with the exception of Nvidia,” Slimon told CNBC. CNBC’s “Signposts”.
“It’s easy to be bearish on companies that are doing well, but thinking that these stocks have peaked for companies with improving fundamentals is, to me, just as naive or dangerous as trying to call a bottom for stocks with deteriorating fundamentals.”
Most stocks in the “Big Seven” are indeed down compared to their 2021 peaks — though Apple is now above its 2021 high and Microsoft is approaching its peak in the coronavirus era.
Slimon went on to say that he expects the shares of these stocks to get a further boost as investors pile in during the fast-paced fourth quarter.
He predicts investors will buy stocks that are not only liquid but also “largely” strong performers, presenting an “opportunity” for portfolio managers looking to add to their investments before the end of the year.
“I doubt these stocks will definitely catch on in the fourth quarter,” Slimon predicted.
The managing director and senior portfolio manager added that he expects the S&P 500 to be “closer” to 5,000 by the end of the year.
As of this writing, the S&P 500 was trading around 4,514 points, jumping to the 5,000 mark, a gain of nearly 11%.
“As the end of the year draws closer, the pain from equity underweighting and the resulting underperformance will intensify, forcing aggressive capital flows,” Slimon argues.
“After the third quarter, year-over-year quarterly earnings will turn negative. Historically, this has been welcomed positively by the stock market.”
some analysts strongly disagree
The optimism had previously drawn the attention of other analysts who strongly disagreed with Slimon’s optimism — and the criticism was domestic.
In February, Mike Wilson, a stalwart of Morgan Stanley and a darling of Wall Street, wrote in an analyst note that the gloomy outlook was pushing shares into the “death zone.”
Wilson, vote First Equity Strategist In an October survey corporate investorarguing that the S&P 500 finds itself in the financial equivalent of a “death zone,” a term used by climbers to refer to altitudes where oxygen is no longer sufficient to sustain human life for extended periods of time.
“Whether out of choice or necessity, investors are once again following stock prices to dizzying heights as liquidity (bottled oxygen) has them crawling into a zone they know they shouldn’t be in and won’t be around for long,” said Firm Xiong wrote. “They climb out of greed, after the ultimate summit, assuming they can do it without catastrophic consequences. But eventually the oxygen runs out and those who ignore the risk get hurt.”
As benchmarks continued to rise throughout the summer, Wilson July entry He was “wrong” but added: “We remain pessimistic about earnings in 2023.”
Wilson’s pessimistic outlook is the result of Michael Burry – ” big short Studios are betting $1.6 billion on the index, hoping to cash in on it.
In early August, the prominent financier bought $739 million worth of put options on the Invesco QQQ Trust ETF, a fund comprised of companies in the popular Nasdaq 100 index. On top of that, he hedged $886 million against the S&P 500 — also put options.
A put option is an agreement to sell an asset at a fixed price on or before a specific date — often signaling a defensive or pessimistic outlook on the market by the seller.