Super Bull Market on the Horizon? Citigroup: US stocks could surge up to 10% by the end of the year
Wall Street predicts that the S&P 500 index will break through 6000 points. Stuart Kaiser, the head of Citigroup's US stock trading, said that US stocks may surge another 5% to 10% before the end of the year. He believes that the scenario of a super bull market is reasonable, provided that the economy avoids a recession and the Federal Reserve cuts interest rates. Although the Federal Reserve does not believe that a recession is imminent, employment market data will be crucial. If the unemployment rate falls below 4.1%, the market will remain positive; conversely, if the unemployment rate rises above 4.3%, investors need to be cautious of risks
Wall Street predicts that the S&P 500 index will break through the 6000 mark. Stuart Kaiser, head of equity trading at Citigroup, said that this bullish sentiment may be justified.
He said on Tuesday, "I think that for this year, the scenario of a super bull market seems reasonable now: that is, the economy avoids a recession, and the Fed cuts interest rates."
Kaiser said that if this scenario comes true, stocks could surge another 5% to 10% by the end of this year.
So far, the latter part of this optimistic scenario has been fulfilled. This month, the Fed initiated an easing cycle with a significant 50 basis point rate cut, aimed at preventing future economic recession.
This preventive rate cut has been welcomed by stock investors, leading to historic highs in the U.S. stock market.
In Kaiser's view, as long as there is no economic recession, the prosperity of the U.S. stock market will continue. However, he pointed out that although the Fed emphasized at its recent policy meeting that it does not believe a recession is imminent, everything depends on the upcoming labor market data.
Since August, the decline in employment has been a core driving factor of economic recession concerns. Investors need to see stable employment data in the upcoming monthly reports, otherwise the prospect of economic recession may become more plausible.
"Our view is that the risk-reward is low because it really depends on the monthly employment data," Kaiser noted, and warned that any data indicating an economic recession could easily undermine any efforts the Fed has made to support the market.
Other Wall Street banks are also focusing on employment data.
According to Morgan Stanley, if the unemployment rate falls below 4.1% and non-farm payrolls increase by more than 150,000, investors can celebrate. This would be the best case scenario for maintaining a positive market momentum.
Otherwise, if the unemployment rate rises above 4.3% and job growth falls below 100,000, stock investors should prepare for the worst-case scenario.
Kaiser said, "If such data emerges, the Fed will not protect the market, which is why we believe the risk-reward is a bit low right now."