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The U.S. economy is doing so well that even the most bullish Wall Street strategists are underestimating stock returns this year.
Jay Hatfield, founder and CEO of Infrastructure Capital Advisors. He told Yahoo Finance in an interview this week that he expects the S&P 500 index to hit 5,750. That's higher than the 5,535 cases Wells Fargo's Chris Harvey predicted this week.
“This American economy is just a giant economy,” Hatfield said in an interview this week, due to factors such as artificial intelligence, a housing shortage and relatively cheap natural gas. “So the advantage for the U.S. is huge and this is a very unusual cycle.”
Hatfield said the U.S. is even more impressive when compared to Europe. He said the European Central Bank was likely to be the first in the United States to cut interest rates amid the economic downturn, and the Bank of England would likely follow suit. This could put upward pressure on the dollar, which could fall into deflation due to its inverse correlation with primary commodity prices.
“This should allow the Fed to cover its rate cut in July, even if the economy remains strong,” Hatfield said.
And as a result, the 10-year Treasury yield could fall to 3.25% this year, a forecast that is even further out of consensus than Hatfield's bullish S&P 500 forecast. He believes downward pressure from global bond markets will help reach the target.
“We expect 2024 to be the year of global interest rate cuts,” he said in a recent note to investors.
Ed Yardeni, a veteran strategist and economist, is also bullish, but his goals aren't as lofty as Hatfield's. He told Yahoo Finance in an interview that he is sticking with his year-end forecast of $5,400.
That said, he shares Hatfield's view that the U.S. economy continues to defy gravity.
“It certainly wasn't a hard landing, and it didn't seem like a soft landing either. The U.S. economy seems to be doing pretty well,” Yardeni said.
If that economic growth continues to drive returns, the specific numbers in the S&P 500 will become more or less irrelevant to most individual investors. Direction is key—and these strategists agree that direction is even more important.
Julie Hyman is co-anchor Yahoo Finance Live, weekdays 9 a.m.-11 a.m. ET. Follow her on Twitter @juleshymanand read Her other stories.
