U.S. markets had a meltdown on Tuesday — the worst since June 2020 — following yet another hot inflation report. But that may not last for long, according to Andrew Slimmon of Morgan Stanley Investment Management, who says the S & P 500 could enjoy upside by year-end. U.S. inflation data out Tuesday showed consumer prices rose more than expected in August despite a sharp drop in gas prices. Markets slumped after the report came out, with the Dow tumbling more than 1,200 points — or nearly 4% down — the S & P 500 dropping around 4%, and the Nasdaq sinking about 5%. On Wednesday, the major averages ended a choppy session on a modestly higher note. "I think July was the peak number," Slimmon told CNBC's " Street Signs Asia " on Wednesday, referring to inflation numbers. "It's not coming down very fast but it is coming down." Slimmon, a managing director and senior portfolio manager, said "Positioning is uniformly bearish. And I suspect that will flip at some point in Q4 pushing the [S & P 500] higher into year-end, not lower." He said the August inflation print doesn't change his view that the S & P 500 will "end the year closer to" where it started — that is, at levels around 4,778. After Tuesday's tumble, the index closed at 3,932.69. Rising inflation has led the U.S. Federal Reserve to hike four times this year for a total of 225 basis points. Markets had been widely expecting the Fed to implement a 75 basis point rate increase at its meeting next week. But following the latest inflation report, some market watchers are even pricing in a 100 basis point hike. But Slimmon said such tight conditions may not last till next year. "I think that's been the story of this year — that the consumer has taken the higher prices. That's not going to last forever," he said. "What's been bad [this year] has been the Fed, maybe next year earnings won't be so good but the Fed will begin to take their foot off the brake and maybe that will alleviate some of these tightening financial conditions," Slimmon added. Stock picks: 'Buy fear and sell greed' Slimmon said it's too late to buy defensive or energy stocks. "We buy fear and sell greed. The time to buy energy was in late 2020 when the futures curve was negative," he said. Energy stocks have been on a roll this year so far — riding higher crude prices — being only one of two sectors in the black under the S & P 500. Slimmon said the fear now is in the consumer sector — the University of Michigan consumer sentiment index hit a 46-year low. "We are adding consumer discretionary names that have been hit into this low consumer sentiment as the rate of change turns positive," Slimmon said. He named three stocks that the firm likes: Home Depot , security products firm Fortune Brands Home & Security , and homebuilder Lennar Corporation . "We have been reducing energy names to fund this," he added.