In a note to clients, Dennis DeBusschere, voted the #1 U.S. portfolio strategist in Institutional Investor’s 2021 survey, says that higher rates are not an obstacle for the S&P 500’s bull market, reports an article in Bloomberg. Inflation-adjusted bond yields will rise this year as the Fed raises rates and hurdles such as coronavirus variants and pricing pressures start to lessen, DeBusschere also predicted.
With the economy growing stronger, corporate profits will continue to expand, helping stocks turn around after a compression in price-earnings multiples over the last year. DeBusschere also predicts the S&P 500 will end 2022 at 5,040—above the Bloomberg forecast of 4,950. The Fed has the tools to make higher real yields happen, DeBusschere wrote, advising his clients to position for that outcome. Financial conditions remain easy, he added, with growth above trend, supply-chain disruptions beginning to right themselves, and strong consumer demand.
DeBusschere further advised clients to invest in companies that are well-positioned to benefit from robust economic growth, such as those in the financial, energy, and industrial sectors.