Piper Sandler’s chart reader wrote that the S&P 500 (SPY) has 11% from current levels. The analyst set a 4,625 target, despite the risks of a possible correction in the short term.
The market needs to watch out for the lingering uncertainty introduced by the Federal Reserve. An interest rate hike of 25 basis points is highly likely. The March 2023 CPI remains high at 5.0%. This is above the Fed Fund’s rate. In addition, the persistently elevated interest rates will take 12-18 months to weigh against the economy.
An economic slowdown will hurt small-cap companies the most. It will not spare mega-cap companies like Johnson & Johnson (JNJ), Pepsi (PEP), Coca-Cola (KO), or Procter and Gamble (PG). Unfavorable evaluations on a price-to-earnings measure for PEP and KO stock are additional headwinds.
Piper’s analyst, Craig Johnson, believes that the stock’s positive gains defeated the negative sentiment. FOMO investors – those who missed out on the strong rebound – will enter the markets on any dip. This will support an uptrend to S&P 500 at 4,625.
Your Takeaway
The S&P 500 trades at around 20 times on $230 in earnings. This seems too high. Astute investors should wait for any lingering pullback to get a better discount. At current prices, an 11% gain is not enough.