Conclusion
Following the latest rally, the risk-reward for stocks has become more balanced. Still, with increasing odds that the June lows hold and our view that a soft landing may be as likely as recession, we remain comfortable with our recommended overweight to equities that we increased in early July. Stocks’ rebound past the 50% retracement level amid surging breadth are positive signals that a new bull market may be underway.
At the same time, the lack of capitulation, still-high risk of a Fed policy mistake, and tinder box of geopolitical tensions suggest perhaps this rally may be due for a pause or even a bit of a retreat. But that doesn’t change our belief that stocks have more room to run through year end and into 2023. We maintain our year-end 2022 fair value S&P 500 target range of 4,300-4,400 with upside above that range in a soft-landing scenario.
Jeffrey, CFA, Buchbinder is chief equity strategist for LPL Financial.