Stocks are on track for a 28% gain this year, and the bull market will stretch into 2024, Oppenheimer says

• The S&P 500 is on track to gain 28% this year after a dismal 2022, Oppenheimer said.
• The investment bank raised its price target for the benchmark index to 4,900.

The S&P 500 is on track to gain as much as 28% this year, according to Oppenheimer's chief market strategist John Stoltzfus.

Stoltzfus, who has made the case for a huge stock market rebound since January, raised his S&P 500 target for the year to 4,900. That implies an 8% rise from current levels and a 28% increase from levels at the beginning of the year.

"Our price target assumes that the resilience exhibited by the US economy will continue along with a high level of sensitivity by the Federal Reserve in raising its benchmark rates further to slow the inflation rate toward its 2% target," Stoltzfus said in a note on Tuesday. "Economic data released in July illustrated both economic resilience as well as some vulnerabilities for the economy as the Fed continues its rate hike cycle."

Investors have turned more optimistic as inflation trends lower, a sign that the Fed's rate hikes are working. Central bankers raised interest rates aggressively over the last year to tame inflation, a move that raised the risk of recession and caused the S&P 500 to sink 20% in 2022.

But recession odds are declining, thanks to inflation easing without unemployment spiking. Meanwhile, growth remained solid, with GDP rising 2% the past quarter, per the latest estimates.

Better-than-expected inflation data could be the green light for the Fed to pause interest rate hikes at their next policy meeting.

"Capitulation by stock market bears on a near wholesale basis of late … suggests that money held on the sidelines may flow into stocks in the months ahead," Stoltzfus said.

In addition to the upbeat employment and inflation trends, the market has also cleared other key hurdles, including a recovery from the banking crisis, corporate earnings holding up, and more participation the market surge, according to Oppenheimer.

"A broadening of the rally across S&P 500 sectors suggests that the bull market that emerged from the October 2022 lows has legs to run higher into 2024," Stoltzfus added.

Other Wall Street commentators have turned more bullish on stocks as the S&P 500 nears its all-time-high of 4,796, which it hit in January 2022. The benchmark index is likely to hit a new record price this year, some forecasters say, thanks to inflation dropping and financial conditions easing into 2024.