It's simply a matter of time before the current bull rally broadens beyond technology stocks, according to John Stoltzfus, chief market strategist at Oppenheimer. The technology sector has dominated the market runup this year, with the S & P 500 tech group outpacing all others by soaring 28% in 2024. In the same time, artificial intelligence darling Nvidia has more than doubled, climbing 149%.
On the other hand, the Russell 2000 small-cap index has risen less than 1%. But as the Federal Reserve begins to eventually cut interest rates, Stoltzfus said in an interview with CNBC that the tide will turn. Stoltzfus' year-end S & P 500 target of 5,500 is higher than at least six other forecasts on Wall Street, according to the CNBC Pro Market Strategist Survey.
The strategist is currently overweight equities, but is looking for market-cap diversification to include small- and mid-caps, which should benefit from lower rates. Meanwhile, the market is also due to broaden as investors turn from high stock valuations and diversify thier holdings. Stoltzfus added that while he still likes the technology sector, he is also bullish on industrial stocks, which he said can be a tech-adjacent beneficiary.
The strategist also favors the financial sector, which he said can benefit from a more normalized yield curve (when short-term rates are below long rates), as well as consumer discretionary stocks benefiting from still-strong U.S. consumer spending.
Sectors such as industrials, financials, he.