Trump's trade deals are set to unleash an 11% rally for stocks through year-end, Oppenheimer says
Call it a comeback.
After markets went haywire in April, Trump’s trade deals might have just saved the bull market, according to Oppenheimer’s chief investment strategist John Stoltzfus.
After lowering his year-end S&P 500 price target after the Liberation Day tariff announcements, Stoltzfus has reinstated his 7,100 target from December 2024, setting the stock market up for its third consecutive year of 20% gains.
In the wake of President Donald Trump’s EU and Japan trade deal, Stoltzfus believes the coast is clear for the S&P 500 to continue reaching all-time highs.
“We believe that enough ‘tariff hurdles‘ have been overcome for now to reinstate our original price target for the S&P 500 of 7100 by year-end,” Stoltzfus wrote in a note on Monday morning.
US exceptionalism in the stock market remains intact, Stoltzfus said. The EU trade deal Trump announced on Sunday sets tariffs of 15% on most European imports, half of the 30% Trump initially threatened.
The EU has also agreed to purchase a “vast amount” of US military equipment and invest an additional $600 billion in the US.
It’s not just trade deals, though. US companies have held up financially through the volatility, and they’re on track for a better-than-expected second quarter earnings season, Stoltzfus said. Out of the companies that have already reported second quarter earnings, 84% have beaten analyst estimates. Wall Street will be watching this week closely, as 164 companies — including the S&P 500’s biggest names such as Apple, Amazon, Microsoft, and Meta —are set to report results.
Helping the S&P 500’s continued climb is the slow place of inflation. Price increases have remained relatively steady and inflation has drawn closer to the Fed‘s 2% target despite tariff volatility.
“Monetary policy by the Fed has brought down the pace of inflation (if not yet to its 2% target level) without thus far causing a recession. This in our view is a substantial achievement considering inflation has gone from 9% in June of 2022 when the Fed recognized that inflation was out of hand to around 2.7% in June of this year,” Stoltzfus wrote.
Stoltzfus’ 7,100 year-end price target implies a forward multiple of 25.8x and an earnings projection of $275.
Investors should continue to bet on information technology, consumer discretionary, communications services, industrials, and financials, according to Stoltzfus.