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Market bull predicts shares might surge one other 8% by July, however lacks readability on remainder of yr

With shares at all-time highs, one in all Wall Road’s largest bulls is taking his optimism up a notch.

Federated Hermes’ Phil Orlando believes the S&P 500 might hit his year-end value goal of 4,500 by July, which suggests about an 8% achieve from present ranges.

“On the tempo the financial system is rising and earnings are rising, you already know we would get there earlier,” the agency’s chief fairness market strategist instructed CNBC’s “Trading Nation” on Friday.

Final week, Orlando’s agency upgraded its GDP forecast to six.4% for the yr, citing the constructive influence stemming from President Joe Biden’s $1.9 trillion coronavirus help bundle. Federated got here into the yr with a 6.1% forecast.

“If we’re proper with our 6.4% estimate, that is going to be the strongest full-year GDP progress since 1984. We posted a 7.2% price,” mentioned Orlando.

The improve comes as earnings season kicks into excessive gear. To date, Orlando likes what he sees.

“First quarter earnings are coming in very robust. Appears to be like like we may very well be up 30% yr over yr. The earnings recession is over,” mentioned Orlando. “Within the second quarter, which can benefit from the full good thing about a few of this fiscal stimulus, we may very well be taking a look at an earnings progress price twice that on a yr over yr foundation.”

But his optimism comes with a catch: Orlando is anxious concerning the yr’s second half as a result of a scarcity of readability surrounding the way forward for an infrastructure bundle and inflation. He believes the dangers might weigh on shares and spark a correction.

“The query is once we get to the tip of the summer time, and we’re taking a look at say a Core PCE [personal consumption expenditures price index] that is up round 2.5%, is that going to plateau after which start to normalize? You understand, is it transitory in Fedspeak? Or, have we began to sow the seeds of a extra sustainable enhance in inflation? We do not know the reply to that proper now,” mentioned Orlando.

If inflation proves to be lasting, he wonders if the Federal Reserve will alter its straightforward cash coverage as 2021 progresses.

“These are necessary questions,” he mentioned. “Proper now we’re simply going to have to observe and wait and make our greatest judgment later within the yr.”

For now, Orlando, who oversees greater than $619 billion in belongings, is not making any large strikes. He is sticking with a playbook designed to revenue from the reopening financial system and a monster market year.

His high picks embody financials, energy, consumer discretionary, industrials, small caps and worldwide shares, with an emphasis on emerging markets.

“These classes have outperformed progress and technology since final Labor Day,” Orlando mentioned. “We predict that commerce has legs, and it’ll proceed by the steadiness of this yr — in all probability into the early phases of subsequent yr, as nicely.”

CNBC’s Robert Hum contributed to this report.

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