‘Accurate’ Discount
John Stoltzfus, chief investment strategist at Oppenheimer
Yearend S&P target: 5,330 target
“Consider the market’s dip and recovery in previous escalation of hostilities from as far back as the Cuban Missile Crisis, the Gulf War, the annexation of Crimea in 2014. Notwithstanding initial volatility we recall that the U.S. market has in the distant and recent past considered how a geopolitical situation might affect corporate revenue and earnings and arrived at a discount that in hindsight has proven to be remarkably accurate.”
“Markets are resilient in our view for a number of reasons. Fourth-quarter earnings season has surprised nicely to the upside across key sectors which suggest growth is not the problem but rather that supply chain disruptions remain prevalent.”
Recovery Potential
Ed Clissold, chief U.S. strategist at Ned Davis Research
Yearend S&P 500 target: 5,000
“Historically, crisis events have triggered pullbacks, but the market has typically recovered the losses within a few months. Looking at 54 crisis events since 1907, the Dow Industrials have fallen an average of 7.1% during the crisis period, but gained an average of 9.7% in the six months after the crisis ended.”
“Russia-Ukraine risks spiking already high energy prices, meaning the earnings slowdown could be steeper than consensus estimates. Big picture, this does not alter our U.S. stock market outlook for a weak first-half with the potential for a second-half recovery.”
Low Earnings Risk
Dubravko Lakos-Bujas, strategist at JPMorgan Chase & Co.
“Russia-Ukraine tension is a low earnings risk for U.S. corporates. While the path remains unclear with potentially elevated market volatility in the short-term, tightening monetary policy, in our view, still remains the key risk for equities. We’d caution against making hasty changes to global asset allocations right now.”
—With assistance from Vildana Hajric.
This article was provided by Bloomberg News.