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S&P 500 predictions

Lee has made some notable calls about the U.S. stock market.

In December 2022, he projected that the S&P 500 Index would hit 4,750 by the end of 2023. Remarkably, the index closed at 4,769.83 on the last trading day of 2023, deviating by a mere 0.4% from his forecast.

The bullish strategist anticipated further upside in the benchmark index. In December 2023, he set a year-end price target of 5,200 for the S&P 500 for 2024.

However, after witnessing the market’s strong performance in January 2024, he suggested that the 5,200 target might be too low.

The upward momentum has indeed been strong: the S&P 500 currently stands at around 5,598, marking an 18% increase year to date.

Lee told CNBC that the fundamental picture now “looks stronger.” He anticipates better-than-expected earnings and, coupled with cooling inflation, expressed confidence that “multiples can expand.”

He recognized the need for a revised target.

“I think 5,200 is clearly too low, but I don't know how much above 5,500 there is into year-end. So I think in a couple weeks, we'll be addressing that,” he said.

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Inflation revisited

Regarding inflation, Lee noted two particular aspects that are easing: “The biggest pressure on many companies’ margins has been wage pressures — that's cooling a lot — and gasoline is cooling, and that's really helping consumer wallets.”

However, he emphasized that the easing of inflation does not equate to a decrease in price levels.

“We're not talking about overall inflation going negative. It's actually that it's going towards 2%,” he said.

Indeed, even though the headline inflation rate is no longer as high as it was in the summer of 2022, the prices of many necessities remain elevated.

For instance, the food index from the CPI has increased by 26% since the beginning of 2020. Similarly, the shelter index has risen by 23% during the same period.

There are also differing perspectives on the future path of inflation. Earlier this year, economist Peter Schiff predicted that inflation could reach double digits in 2025, cautioning that “the first digit may not be a one.”

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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