Stifel says the S&P 500 will keep climbing 'wall of worry' to hit 4,400, gives 10 stocks to play rally

Published Thu, Nov 2 202312:30 PM EDTUpdated Thu, Nov 2 202312:42 PM EDT

The S & P 500 can rise to 4,400 by the end of the year as near-term recession talk proves unfruitful, according to Stifel. Market strategist Barry Bannister said the index should reach the 4,400 level before the end of December, to then trade near flat into April of 2024. That 4,400 level would mark a gain of 3.8% from Wednesday's close and 14.6% from the end of 2022. "We see no imminent U.S. recession as the S & P 500 climbs the proverbial Wall of Worry," Bannister wrote to clients in a note. .SPX YTD mountain The S & P 500 this year The average market strategist expects the S & P 500 to finish 2023 at 4,358, according to a CNBC Pro survey. Despite general optimism, Bannister said a new high by year-end — which would mean topping 4,607.07 — is highly unlikely. That's because there's too much fear in the market, with the S & P 500 at one point moving into correction territory. But he said concerns of a near-term recession that could devastate the market are overblown. Part of the reason why he doesn't see a recession on the horizon is because one typically requires a correction in the ISM Index. While the reading did show more contraction than economists expected in October, Bannister said leading indicators for both global and U.S. manufacturing PMIs show a rebound ahead. The history of lows for the ISM index also points to the likelihood of a recovery into the fourth quarter of 2024, Bannister said. And it's likely, he said, that the index bottomed in June of 2023. Avoiding a recessionary-level slowdown for the ISM PMI would imply upside for the S & P 500 over the next six months, he said. He also said inflation, despite being somewhat sticky, is not high enough to prompt more interest rate hikes from the Federal Reserve within the next six months. That can quell fears the Fed would overtighten the economy into a recession in the near term. Bannister expects the U.S. consumer to remain resilient, which provides another reason to be bullish. He said excess savings and real wage growth can boost consumer sentiment and consumption going forward, even as economic headwinds tied to high interest rates and the resumption of student loan payments mount. New leadership While the market will climb going into the end of the year, Bannister sees new leadership taking the throne. Bannister said outperformance is shifting to cyclical value industries like banks, insurance, materials or real estate, and that this group should lead into mid 2024. That comes after much of the year has been defined by strong rallies from large technology names and some other cyclical growth stocks, which some have argued masks otherwise weak market fundamentals. The strategist listed the largest cyclical value stocks with buy ratings from the firm. CNBC Pro compiled 10: — CNBC's Michael Bloom contributed to this report