Recent inflation data points to a strong economy that could propel the S & P 500 to break the 5,000-point threshold by the end of 2023, according to Peter Essele, head of portfolio management for Commonwealth Financial Network. June data for two closely watched inflation gauges released this week, the consumer price index and producer price index , showed costs easing across the board. That signals to Essele that the S & P 500 can keep charging upward, with his prediction of the 5,000 level being reached implying the S & P 500 will gain another 11.8% from Wednesday’s close. The S & P 500 has already had a stellar year, rising 17%. .SPX YTD mountain SPX in 2023 “From an economic and market perspective, the second half of 2023 is shaping up to be much stronger the first half,” Essele said. “Moderating producer and consumer prices on the backdrop of strong job growth and wage gains should translate into a surge in economic activity. We could easily see the S & P 500 top 5000 by the end of the year.” Essele also said the data shows the Federal Reserve’s fight against inflation has been won. Both the CPI and PPI showed less growth in prices than economists anticipated. In this environment, he precited consumer services and technology stocks — particularly software names — will continue to outperform, while energy, materials and consumer staple names will lag. When looking at stocks by market cap, he said larger-cap names should continue to perform better than their smaller counterparts. To be sure, the 5,000-point prediction makes him more bullish than Wall Street is. The average market strategist forecasts a target of 4,255, which is 4.9% lower than where the index closed Wednesday, according to CNBC Pro’s survey. It’s more than 400 points off the highest target of the 15 strategists surveyed, with the most optimistic prediction coming from CFRA’s Sam Stovall at 4,575. — CNBC’s Michael Bloom contributed to this report
