Citi Sets a 4,200 Price Target for S&P 500 by Year-End

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© Reuters. Citi Sets a 4200 Price Target for S&P 500 by Year End

By Senad Karaahmetovic

Citi strategist Scott Chronert expects the to rally toward 4,200 by year-end. This would imply a rally of almost 8% from current levels.

He believes “earnings resilience” will dominate this year’s second-half performance while the index should trade “flat” in the first half of the next year.

“Our year end ‘22 4200 target is justified via a higher probability of economic resilience during 2H ‘22. We model recession risk as more likely an early to mid ’23 concern. In turn, our mild recession scenario called for a 3650 level on the SPX, which was nearly touched in mid-June. Current risk off positioning and 2H earnings resilience set up for a mean reversion trade higher into year end,” Chronert said in a client note.

The strategist sees a “volatile summer” ahead as the Fed is by 75 bps in July and 50 bps in September.

Still, the S&P 500 is likely to stay well supported as earnings trends are “the most relevant driver of US equity returns over longer timeframes.”

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