As retail investors head for the exit as share prices fluctuate sharply, Evercore ISI’s Julian Emanuel wants to put money to work.
He sees the market environment as very ugly, but believes the economy will avoid a recession, particularly given the health of credit markets and continued earnings.
“The way to the top [stock] pricing really is a function of being able to discount macro news and focus on the fact that you’re still going to have mid- to high-single-digit earnings growth,” the firm’s senior managing director told CNBC’s “Fast Money.” on Tuesday.
His year-end target for the S&P 500 is 4,800, a 22% jump from Tuesday’s market close. Emanuel argues that much of the market’s losses were driven by retail investors who were overexposed to growth stocks, specifically Big Tech.
“The bull case is essentially based on the exhaustion of the public sale of these shares,” he said.
According to Emanuel, retail investors will return to stocks when they realize that employment remains strong and inflation is peaking. He expects that to happen later this summer.
“When things change, it will be a more benign environment for equity markets,” Emanuel said.
His forecast also hinges on the benchmark 10-year Treasury yield cooling off and ending the year at 3%. On Tuesday, the yield fell to its lowest level in more than a month.
Emanuel is more bullish on health care and sees a strong upside for long-term investors. He is also overweight financials and industrials.
“The shift from growth to value is something that is ongoing,” said Emanuel.