Wall Street's most optimistic strategist: The S&P 500 index is expected to rise to 4900 points by the end of this year!

The most optimistic strategist on Wall Street suggests that the recent weakness in the US stock market may continue for a while, but he still believes that the S&P 500 index is expected to reach a new all-time high this year.

Expectations for a New High in the US Stock Market by Year-end

John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management Inc., predicted at the end of July that the S&P 500 index would rise to over 4900 points by the end of 2023 (exceeding the previous record of 4796 points set on January 3, 2022), compared to his forecast of 4400 points in December last year. This implies a 9.2% increase from Monday's closing level of 4,487 points.

Moreover, this is the highest target price for the broad stock index among the 20 Wall Street firms surveyed by MarketWatch in August.

"The optimism in the US stock market is relatively high, while the Federal Reserve has not yet reached its inflation target," said Stoltzfus, the lead strategist at Oppenheimer, in a report on Sunday. They also stated, "We recommend investors to moderately anticipate the end of the rate hike cycle or even a rate cut."

Stoltzfus said, "The stickiness of food, services, energy, and other prices proves that the Federal Reserve has reason to remain vigilant, and there may be another rate hike this year and next year."

Bullish on the Energy Sector

However, Stoltzfus does not believe that the current unfavorable factors will prevent the S&P 500 index from reaching the target of 4900 points.

Investors expect that the inflation report for August, which will be released this week, will provide a clearer indication of whether the Federal Reserve will continue to intensify its efforts to combat inflation.

Meanwhile, a key Wall Street volatility index also indicates that there will be "some volatility" in the stock market in the near future, prompting investors to remain cautious, according to Stoltzfus.

The CBOE Volatility Index (VIX) reported 13.82 points on Monday, hovering near a 12-month low, which is about 30% lower than the average level of 19.9 points over the past year and 37% lower than the average level of 21.88 points over the past two years.

Stoltzfus suggests that the energy sector is becoming increasingly attractive as policymakers in the United States and other countries are working to curb inflation and manage economic growth.

According to FactSet data, the Energy Select Sector SPDR Fund (XLE) has risen 3.9% year-to-date, while WTI crude oil prices have risen 8.5%.