Andrew Slimmon of Morgan Stanley Investment Management believes the market will see a "strong rebound" by the end of the year.
He said he believed the S&P 500 would be "close" to 5,000 by then. If the index reaches 5,000, it will be up nearly 13% from Monday's close of 4,433.
"As the end of the year approaches, some reversal of the downweight will exacerbate the positive flow of funds," said Slimmon, the company's managing director and senior portfolio manager.
The lackluster performance of the stock market in August is a far cry from the rally earlier this year. "After the third quarter, quarterly earnings will turn from negative to positive year-over-year. Historically, this has been positively welcomed by the stock market. ”
Slimeon also noted that there will be "huge" spending on U.S. public works in the fourth quarter, which will be "very positive" for the stock market, including some policy-introduced investments.
"Investors' positions are too bearish. This has been the case throughout the year – sentiment has risen, but liquidity has yet to turn positive. "I always hear the saying: 'Why should I buy stocks when I can get a 5% fixed income?'" he said This is certainly true. ”
Still, Slimeon said that while a 5 percent return in the money market looks attractive, if the stock market rises by 15 to 20 percent, it could be painful for investors who are under-allocated in the stock market.
Major stock indexes moved higher after new economic data from the United States overnight. The latest Job Openings and Labour Turnover Survey showed a decline in jobs for sale in July, a sign of stability in the job market. Meanwhile, the Conference Board's consumer confidence index fell more than expected in August.
The Conference Board's consumer confidence index for August was 106.1. Economists had expected the index to be 116. Meanwhile, July's figure was revised to 114. Dana Peterson, chief economist at the Conference Federation, noted that August's data erased the streak of June and July.
"August's disappointing headline data reflects a decline in both current conditions and expectations," she said. "Fill-in-the-blank responses show that consumers are once again struggling with rising prices, especially groceries and gasoline."
However, the positive thing for the stock market is that if US inflation expectations continue to slow, this can ease the pressure on the Fed to tighten monetary policy to some extent. In addition, this situation also eased the upward pressure on US Treasury yields to some extent, which will be more favorable for some large technology stocks.