Market bull predicts stocks could surge another 8% by July, but lacks clarity on rest of year

3 weeks ago 27

With stocks astatine all-time highs, 1 of Wall Street's biggest bulls is taking his optimism up a notch.

Federated Hermes' Phil Orlando believes the S&P 500 could deed his year-end terms people of 4,500 by July, which implies astir an 8% summation from existent levels.

"At the gait the system is increasing and net are growing, you cognize we mightiness get determination earlier," the firm's main equity marketplace strategist told CNBC's "Trading Nation" connected Friday.

Last week, Orlando's steadfast upgraded its GDP forecast to 6.4% for the year, citing the affirmative interaction stemming from President Joe Biden's $1.9 trillion coronavirus assistance package. Federated came into the twelvemonth with a 6.1% forecast.

"If we're close with our 6.4% estimate, that's going to beryllium the strongest full-year GDP maturation since 1984. We posted a 7.2% rate," said Orlando.

The upgrade comes arsenic net play kicks into precocious gear. So far, Orlando likes what helium sees.

"First 4th net are coming successful precise strong. Looks similar we could beryllium up 30% twelvemonth implicit year. The net recession is over," said Orlando. "In the 2nd quarter, which volition bask the afloat payment of immoderate of this fiscal stimulus, we could beryllium looking astatine an net maturation complaint doubly that connected a twelvemonth implicit twelvemonth basis."

But his optimism comes with a catch: Orlando is acrophobic astir the year's 2nd fractional owed to a deficiency of clarity surrounding the aboriginal of an infrastructure bundle and inflation. He believes the risks could measurement connected stocks and spark a correction.

"The question is erstwhile we get to the extremity of the summer, and we're looking astatine accidental a Core PCE [personal depletion expenditures terms index] that's up astir 2.5%, is that going to plateau and past statesman to normalize? You know, is it transitory successful Fedspeak? Or, person we started to sow the seeds of a much sustainable summation successful inflation? We don't cognize the reply to that close now," said Orlando.

If ostentation proves to beryllium lasting, helium wonders if the Federal Reserve volition set its casual wealth argumentation arsenic 2021 progresses.

"These are important questions," helium said. "Right present we're conscionable going to person to ticker and hold and marque our champion judgement aboriginal successful the year."

For now, Orlando, who oversees much than $619 cardinal successful assets, isn't making immoderate elephantine moves. He's sticking with a playbook designed to nett from the reopening system and a monster marketplace year.

His apical picks see financials, energy, consumer discretionary, industrials, small caps and planetary stocks, with an accent connected emerging markets.

"Those categories person outperformed maturation and technology since past Labor Day," Orlando said. "We deliberation that commercialized has legs, and it volition proceed done the equilibrium of this twelvemonth — astir apt into the aboriginal stages of adjacent year, arsenic well."

CNBC's Robert Hum contributed to this report.