The S&P 500's recent nosedive has stock market bulls feeling skittish about whether stocks can regain their 2023 mojo.
Oppenheimer's chief investment strategist John Stoltzfus lowered his price target for the S&P 500 from 4,900 to 4,400. Stoltzfus had held the highest year-end target for the S&P 500 among strategists tracked by Yahoo Finance.
Stoltzfus noted that Oppenheimer is still "constructive" on equities but as rising yields and increased geopolitical concerns have weighed on stocks, this new target "seems more realistic and achievable at this juncture."
On Aug. 1 Stoltzfus boosted his year-end price target to 4,900 from 4,400, citing a stronger-than-expected US economy. That narrative has largely played out with the labor market steadily growing and the US recently posting its best annualized growth for a quarter in nearly two years.
But the end of July also proved to be the high-water mark for stocks thus far this year. Since Aug. 1 the S&P 500 and the Nasdaq Composite have retreated more than 10% from their 2023 highs and officially entered correction territory.
"Ironically even as economic and corporate earnings resilience have persisted since the end of July, market sentiment soured on stocks as market-priced interest rates moved higher and geopolitical risk ramped up," Stoltzfus wrote in a research note on Monday.
"This irony suggests at least in part that much of the recent downside in stocks reflects a market tantrum by highly leveraged players in the market who have to deal with the new paradigm of the end of free money orchestrated by the Fed wherein now bond issuers (and other borrowers) pay for the privilege of borrowing and bond buyers and lenders get something in return in the form of a coupon bearing a realistic and fair yield."
Stoltzfus noted that the recent move lower in stocks isn't out of the ordinary for a Fed hiking cycle and the turbulence caused by increased tensions in the Middle East also aren't unexpected. He thinks valuations are nearing attractive levels again, and for now the strong economy story remains a tailwind for equities.
Stoltzfus isn't alone in thinking the recent corrections likely put stocks at a more attractive valuation. In a new note on Friday titled "Pullback=Opportunity," Truist co-CIO Keith Lerner wrote, "We see the recent pullback as an opportunity to add for those investors underweight equities."
"The weight of the evidence in our work is skewing more positive in the larger context of a choppy range," Lerner continued. "If we are right that we are getting closer to a rebound, then we would expect some of the beaten-up areas, like small caps and the S&P 500 Equal Weight Index to show some near-term relative outperformance."
Josh Schafer is a reporter for Yahoo Finance.
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