Wall Street has a new most bullish strategist.
Binky Chadha, Deutsche Bank’s chief global strategist, said in a note Thursday that his year-end target for the benchmark S&P 500 is 2,600. That topped the call for 2,575 made by John Praveen, Prudential’s chief investment strategist, which was the previous high that Business Insider observed.
Both strategists believe the market will maintain the momentum it gained after President Donald Trump’s election in November.
However, Chadha dismissed the dominant narrative of the reason for the rally: that investors bought stocks because they were looking forward to tax cuts, fewer regulations, and infrastructure spending. Rather, Chadha argued, the stock market simply priced out the uncertainty that was associated with the presidential election, as is typical after tight races.
“A V-shaped recovery in GDP and earnings growth has been unfolding for a year and has further to go,” Chadha said. He saw the turnaround in commodity prices, and in earnings in the sector, as adding to the upside for stocks. He forecast earnings growth of 13% this year.
Chadha said although the S&P 500 multiple of 19x is higher than its historical average, stocks do not look expensive on an absolute basis.
“In most past recoveries the multiple ended up higher than fair value as forward-looking investors priced in a stronger growth outlook well before realized earnings delivered,” he said. “We have yet to see that phase in this recovery.”
Additionally, companies will provide a key source of demand for their stocks. Chadha forecast that companies will spend $500 billion on buybacks this year, driving 10% of S&P 500 price gains.
His target of 2,600 represents a 15% gain for the year.