Kevin O'Leary says stocks are gearing up for likely 8% return this year as consumers are flush with cash and the economy heads for a soft landing

• "Shark Tank" investor Kevin O'Leary told Fox Business he sees stocks turning in a return of about 8% this year and avoiding a plunge.
• Stocks will find upside support as the US economy is "flush with cash" and will manage a soft landing.

Projections of stocks plunging have been rolling in, including a warning from Wall Street's most accurate forecaster that the market may crash 26% in the coming months. But investor Kevin O'Leary of "Shark Tank" fame foresees equities avoiding a sharp slide.

"We may actually get what people keep saying is impossible … a soft landing. And what that means to me is an 8% return, probably 6% in capital appreciation and 2% dividend yields this year. Not the best year ever, but certainly not a 20% correction from where we are here," O'Leary said on Fox Business Wednesday. "We've already had many high-flying stocks correct. I'm amazed by this economy."

Underpinning his view is the condition of consumer spending, which drives nearly two-thirds of the world's largest economy, even at a period of high inflation. Markets are in "an extraordinary time" of full employment even though the Federal Reserve is rapidly raising interest rates.

In the midst of it, O'Leary said he was blown away by the January retail sales report released last week that showed a 6.4% increase year over year. The rate outstripped expectations of 6.2%.

He said Walmart's earnings report released this week indicated customers were buying less expensive items. "But the economy is still flush with cash, the consumer's still healthy and still has a consumable demand."

With consumers still on relatively strong footing, O'Leary said he's optimistic about profit in Corporate America.

"[Coming] out of the pandemic the entire S&P 500 went to a direct-to-consumer model. I don't care if you're Nike or anybody else. Margins went up – pre-pandemic Nike was at 9% of sales direct consumer. Now they're in over 30 on their way to 50. Much higher margins," he said. "The reason that you should think optimistically about margins and free cash flow is many companies have figured this out. There's a new America 2.0."

To be sure, the rally that kicked equities higher at the start of 2023 has been slowing recently, with the S&P 500 this week experiencing its worst sell-off of the year. Investors appear to be nervous that the Federal Reserve will continue to raise interest rates above their expectations to further tame inflation.

But stocks have "corrected accordingly" on those fears, and the market has now baked in expectations for further rate hikes, said O'Leary.

"The real decision is asset allocation," he said. "Have we come to a time yet where you would take your money out of stocks and buy bonds?" Cash is yielding about 4.2%, he noted in listing options for investors.

"I'm 70% stocks, 30% fixed income. I used to be 60/40. I still am optimistic on the economy … and this is secret sauce, the juice that really makes it work: total gridlock in Washington. No more spending bills. Impossible to get any policy done. And the market loves that."

He noted a preference for healthcare and energy stocks. Meanwhile, he said business is booming at his own entities.

"I've got 54 companies now that are private that are just killing it. We haven't seen the slowdown yet. Where is it? Everybody keeps telling me recession, recession. Okay, show it to me."