PUBLISHED MON, SEP 12 20227:46 PM EDT
Source: CNBC by Stephanie Landsman
Credit Suisse expects the Federal Reserve to pause interest rate hikes sooner than widely expected due to tumbling inflation.
According to the firm’s chief U.S. equity strategist, it will launch a powerful market breakout.
In a new note previewing this week’s August consumer price index and producer price index data, Golub contends the inflation “collapse” will happen over the next 12 to 18 months.
“Futures indicate that Food and Energy prices should fall -5.7% and -11.8% by year end 2023, while Goods inflation has declined from 12.3% to 7.0% since February,” he wrote. “Over the past year, Services and Rents are up less than Headline CPI (5.5% and 5.8% vs. 8.5%).”
“The market believes that come the first quarter, if we continue to go on this glide path where things renormalize, that they’re going to either pause or signal that they might pause,” he said. “If they do that the stock market wants to move ahead of it. The stock market is really going to take off.”
And, now may be a strategic time to look for opportunities. Golub particularly likes consumer goods, industrials, refiners and integrated oil producers.
“Valuations on the market are somewhere between fair and inexpensive right now, meaning there’s more upside from p/e [price to earnings] multiples,” he added.
Golub’s S&P 500 year-end target is 4,300, which implies a roughly 5% gain from Monday’s close. The index is up almost 8% over the past two months. However, the S&P is still off about 15% from its record high.