"The bubble is bursting": Strategists urged investors to buy stocks after the crash
Wall Street experts view the recent stock market sell-off as a temporary correction and expect stocks to rise by the end of the year
Leading Wall Street strategists view the recent sell-off as a buying opportunity and are maintaining their high year-end targets for the S&P 500 index / Photo: Shutterstock.com
Many Wall Street strategists had expected a short-term market decline following the U.S. midterm elections. What happened on November 5 exceeded their expectations: the S&P 500 index plummeted 4.4% in a single day, while the Nasdaq 100 fell 6.4% amid fears that a Democratic victory would slow the development of artificial intelligence infrastructure. Now, strategists are urging clients to take advantage of the sell-off to buy stocks, anticipating market growth through the end of the year, according to Bloomberg.
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"This is exactly where investors should increase their risk exposure over the next two to three weeks," said Mike Wilson, Morgan Stanley's chief strategist for the U.S. stock market.
He admitted that the scale of the post-election sell-off had surprised him. Nevertheless, the strategist reaffirmed his year-end forecast for the S&P 500 index to reach 8,000 points, which implies an 8.4% increase from Friday’s closing level.
Wilson is confident that U.S. stocks are poised for a rally. He advises investors to buy stocks in the consumer sector, especially if interest rates and oil prices continue to fall.
Ed Yardeni, chief investment strategist at Yardeni Research, views what has happened as a correction rather than a trend reversal.
“We had a bubble in the AI sector, and I think the air is now coming out of it. But if it were to burst, it would have a serious negative impact on the economy, and I don’t see that happening,” he said.
Yardeni maintains his year-end target for the S&P 500 at 7,900 points and recommends keeping an eye on the healthcare sector. “I was expecting buying opportunities after the election, and I think we’re seeing some pretty good ones right now,” he added.
“It would be unwise to exit the market after it has corrected slightly in response to the election results,” says Jonathan Golub, chief equity strategist at Seaport Global Holdings. He expects the S&P 500 to reach 8,200 points by the end of the year and describes himself as a “strong buyer.”
On average, strategists expect the S&P 500 to close the year at 7,973 points, according to Bloomberg. One of the main obstacles to a rebound in the index could be the ongoing weakness in the AI sector, which has driven the benchmark higher for most of the four-year bull market. The Philadelphia Stock Exchange Semiconductor Index (SOX) plummeted 12% on November 5 and remains 36% below its June peak.
“Semiconductors and AI infrastructure, which have truly driven the market higher this year, will continue to face pressure,” said Osung Kwon, chief equity strategist at Wells Fargo. “For the market to rise significantly higher, we need a contribution from high-beta stocks.”
He notes, however, that if concerns about a decline in AI investment persist, the market could be supported by hyperscalers Alphabet and Amazon—on expectations that they will have to cut costs. Kwon’s year-end target for the S&P 500 is 7,700 points—4% above the current level.
This article was AI-translated and verified by a human editor
