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The bull market has just started, and the S&P 500 (SP500) could reach 6000 by the end of 2025 or in 2026, said Steve Auth, Federated Hermes Equities CIO.
In a CNBC interview, Auth said that the S&P 500 (SP500) rally -- which propelled its index past 4,996 on Thursday, up 6.17% from a month ago -- still has room to broaden out.
Federated Hermes Equities set the S&P price target at 5,200 last year, but Auth said it could go up to 6,000 by year-end 2025 or in 2026, with not just the mega-caps rallying.
“What I've been telling our investor base is to think a little bit longer term here,” he said. “Certainly, the market's a little overheated short-term, but we could end higher than 5200.”
Auth said that today’s economic environment is encouraging for stocks with the Fed pivoting tightening policy, and earnings reports showing a resumption of growth after a one-year earnings recession.
“We've got earnings going up to $300 a share on the S&P by 2026,” he said. “[For] 2025 is $275. It may sound like a lot, but the nominal GDP of the U.S., which is what S&P 500 (SP500) companies eat, is going to be up about 40% off 2019 by 2025.”
Auth estimates three rate cuts by the Fed this year.
“So, we're looking for laggards,” he added. “We’re tilted towards value names, in particular regional banks (KRE). They've got another whack on the head over this very idiosyncratic situation.”
Stocks he likes include First Horizon Corp. (FHN), PNC Financial (PNC), Sanofi (SNY), General Motors (GM), Knight-Swift Transportation (KNX), International Business Machines (IBM), Federated Hermes Kaufmann Small Cap Fund A (FKASX), and Comfort Systems USA (FIX).