As recession fears swirl on Wall Street, Citi says corporate profits may surprise many later this year.

And the stock market's performance should follow.

"We see room for U.S. equities to work higher into year-end ‘22, triggered by more resilient earnings than commonly expected, and potential valuation relief as Fed hawkishness is more fully priced in," said Citi strategist Scott Chronert in a new note to clients.

Chronert sees the S&P 500 rallying about 8% from current levels to end the year at 4,200.

"We conclude that the inflation surge beginning about this time a year ago has mostly been an incremental positive for earnings growth," Chronert said.

"Simply, strong pricing has offset supply constraints and upward cost pressure. We don’t expect a new structural paradigm at this point, but do think that current earnings tailwinds can continue in the immediate term." The S&P 500 finished Friday's trading session at 3,899.

To be sure, markets continue to reflect greater caution in the outlook for corporate profits than conveyed by Chronert. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are coming off their worst starts to a year in several decades, and interest rates have risen faster than expected amid sticky inflation.

Virtually no areas of the market have been left out in the broader re-repricing of risk assets. Previous high flyers such as Amazon (AMZN), Tesla (TSLA), and Netflix (NFLX) are all down more than 30% so far in 2022. Apple (AAPL), often seen as a relative safe-haven, is off 18% on the year.

Ten of the 11 sectors in the S&P 500 are sitting on losses this year, with only Energy (XLE) in the green year-to-date.

Earnings are also poised to be lackluster heading into second quarter earnings season.

The estimated earnings growth rate for S&P 500 companies in Q2 is 4.3%, according to data from FactSet. If that growth rate is hit, it would mark the lowest year on year growth rate reported by the S&P 500 since the fourth quarter of 2020. Additionally, 71 S&P 500 companies have already issued negative earnings guidance.

"We do expect there are going to be [earnings] disappointments, but we do expect there will be some remarkable surprises over the course of the next few quarters," Oppenheimer strategist John Stoltzfus told Yahoo Finance Live on Friday, echoing Chronert's sentiment.

Stoltzfus, one of Wall Street's most ardent bulls, recently lowered his 2022 S&P 500 year end target to 4,800 from 5,330.

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Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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