Brian Belski, chief investment strategist at BMO Capital Markets, sees small gains for stocks next year, citing a belief that the U.S. will see only a mild recession and that the Federal Reserve's tightening cycle will end soon. BMO set its S & P 500 base case target for 2023 at 4,300, a little more than 5% above Wednesday's close of 4,080.11. Belski assumes the U.S. suffers a modest economic downturn and that the Fed ends its hiking cycle by May, at the latest. "We think any potential recession this time around will be much tamer," Belski said in a note to clients. "Remember, the Fed has embarked on one of its most aggressive rate hiking campaigns ever, yet employment remains historically strong, while consumer balance sheets have remained intact." The stock market has been in turmoil this year as the Fed started in March to aggressively hike rates and fight inflation running at the fastest pace since the early 1980s. The S & P 500 fell into a bear market, and today stands more than 14% lower on the year. Belski believes that the central bank winding down its tightening policy will prove a tailwind for stocks. "The months leading up to the conclusion of the previous four tightening cycles have been met with muted stock market returns, on average, but the months following the end of such cycles tend to see fairly strong gains," he said. Fed Chairman Jerome Powell said Wednesday he sees the central bank in position to reduce the size of rate hikes as soon as this month. Belski said that investor worries about recessions and their impact on stocks and earnings may be a bit overstated. He noted that the S & P 500 has averaged a 5.8% gain during years coinciding with a recession while its earnings per share averaged only a 2.7% decline. "We cannot envision anything other than a 'technical' recession occurring during 2023," Belski said. "The market has probably already discounted much of the recession risk, particularly should it wind up being mild as we expect." If the economy is able to skirt a recession altogether and the Fed engineers a so-called soft landing, Belski sees the S & P 500 rising to 4,800 by the end of 2023 — almost an 18% gain from current prices.