Tech stocks are getting pummeled, but that didn't stop a prominent Wall Street strategist from raising his price target for the S&P 500 Monday.
The five biggest technology stocks lost nearly $100 billion in market value Friday, which caused the Nasdaq composite to post its worst week of the year. Apple and other technology stocks dropped again Monday, with the iPhone maker shares down as much as 7 percent in two days.
"We remain constructive on equities given the recent pickup in global activity, stronger EPS, and reasonable valuations," RBC Capital strategist Jonathan Golub wrote in a note to clients Monday.
"Equities would do quite well in the near term, led by financials as well as the most cyclical groups such as materials, industrials, and energy. Small-cap, value, and more globally oriented names would also do quite well. By contrast, low-vol and the bond proxy sectors would come under pressure," he wrote.
The strategist raised his price target for the S&P 500 to 2,600 from 2,500, representing 7 percent upside from Friday's close. The new forecast ranks second behind Morgan Stanley strategist Mike Wilson's S&P 500 target of 2,700, which is the highest target on Wall Street, according to CNBC's Market Strategist Survey.
Golub calculated his new target by evenly discounting his two "modest growth" and "reacceleration" economic outlook scenarios:
1) "Modest Growth. Despite strong global PMIs, U.S. GDP is expected to grow only 2.2% in 2017, roughly in line with its post-recession average … A continuation of these conditions should keep the Fed at bay, extending the business cycle. Large cap and growth stocks should outperform under this scenario."
2) "Reacceleration. Stronger conditions globally and a tight labor market should lead to a pickup in nominal GDP … The Fed should engage more quickly under this scenario, shortening the business cycle. Small-cap and value stocks should lead, with financials performing well and bond proxies coming under pressure."
As a result of his analysis, Golub increased his earnings-per-share estimate for the S&P 500 to $130 from $128.
While the strategist is bullish on the market overall, he is more subdued over the impact of President Donald Trump's economic agenda.
"While many believe that fiscal stimulus would be a boon for equity markets, we think the effects would be more muted, as increased inflationary pressures would likely lead to more hawkish Fed policy," Golub wrote.