Why this strategist sees the S&P 500 hitting 6,500 this year
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Stocks (^GSPC, ^IXIC, ^DJI) are nearing record highs as investors anticipate interest rate cuts and steady earnings.
Federated Hermes chief market strategist Phil Orlando joins Market Domination to explain why he still expects the S&P 500 to hit 6,500 this year.
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And speaking of that, Phil, I'm looking at the SPX here, the S&P 500, you're knocking right on that February peak, Phil. When you talk to your clients, are you telling them, listen, we're going to move higher from here, near to intermediate term? And what does that depend on, Phil?
So, we're not changing our our view. We we thought the S&P 500 would get up to the 6,500 level this year, uh, and 7,000 by the end of next year. So we're we're delighted that we've seen this 25% rebound, uh, and we're encouraging, you know, clients to hang on. We think, uh, we think things are going to go higher. We think the economy is not going into recession. Uh, we think corporate earnings are going to continue to grind higher. Uh, if we're right that inflation remains relatively benign and that the labor market is is loose, uh, is weakening a little bit here, that suggests that we may see a couple of rate cuts from the Federal Reserve at the back end of the year. Uh, lower interest rates likely will, uh, result in in in a slight expansion of price earnings ratios. And and that, you know, represents the base case for why we think stocks ought to be higher over the next 18 months or so.
What could go wrong with that scenario?
Well, there there are many things. Uh, you know, we we started this conversation talking about the progress we're making on trade. Suppose trade, suppose these discussions blow up, you know, by historic proportions and we don't have a trade deal and we're back to where we were, uh, you know, on liberation day, and that's certainly a problem. Uh, suppose the Federal Reserve, uh, decides that it it doesn't like what it sees. It's it it needs more information on tariffs and it uh, it opts not to uh, cut interest rates later in the year. Maybe they they turn and hike interest rates preemptively because they think that, uh, the the destruction of the tariff situation is going to result in higher inflation and the Fed is going to focus on, uh, trying to bring higher inflation down rather than cater to the fact that the labor market is weakening. So there there's any number of factors, you know, among our assumptions that could go wrong, uh, but, you know, at least for the last couple months, things have been, you know, falling into place and moving in the right direction.