S&P 500 (SPX) Rises Even as Oil Prices Fall?... "Will Hit 9,000" Surge Theory Emerges

▲ International oil prices, US stock market / AI-generated image

As international oil prices plummeted by 27% in just two weeks, a variable emerged that could flip the US stock market. The outlook suggests that if oil prices fall below $60 and interest rate cuts materialize, the S&P 500 Index (SPX) could soar to 9,000 this year.

The cryptocurrency podcast "Trader Talk With Kenny Polcari" intensively covered falling oil prices and the US stock market outlook in its July 8 (local time) episode. Jay Hatfield, CEO and CIO of Infrastructure Capital Advisors, estimated OPEC's maximum daily production at approximately 32 million barrels. He projected that if an excess supply of about 4 million barrels per day occurs, oil prices could drop below $60.

Hatfield predicted that the sharp drop in oil prices would lower future inflation indicators. Regarding the possibility of interest rate hikes, he stated, "absolutely zero." He further anticipated three interest rate cuts over the next 12 months, with at least one expected this year. Based on lower interest rates, Hatfield set the S&P 500 Index's year-end target at 9,000.

The S&P 500 Index 9,000 forecast implies an additional rise of nearly 20% from the current level of around 7,400. Hatfield cited the 2027 corporate earnings outlook and a price-to-earnings ratio of 23x as grounds. He argued that it is difficult to apply the past 18x P/E ratio directly, as the US corporate tax rate has decreased from 35% to 21%. He assessed 22x as a sustainable level and explained that the 2027 corporate earnings forecast continues to rise.

Yan Salaji, CEO and co-founder of Reflexivity, cited liquidity flows as a more critical market variable than the controversy over AI overvaluation. Salaji stated, "The direction of the market is definitely influenced by whether liquidity is flowing in or out." He believes that unless the Federal Reserve enters an aggressive interest rate hike cycle, the market is unlikely to collapse under its own weight.

Both guests believed that investment opportunities are expanding beyond technology stocks. For short-term promising sectors, they suggested airline stocks, which directly benefit from falling oil prices, and homebuilding stocks, which reflect expectations of falling interest rates. For investments over the next 3-6 months, they pointed to small-cap and mid-cap stocks. The outlook is that if the market abandons interest rate hike forecasts and reflects inflation slowdown due to falling oil prices, the next upward phase of the US stock market could begin.

[Article Key Summary]

-Jay Hatfield predicted that oil prices could fall below $60 due to increased OPEC production and anticipated three interest rate cuts over the next 12 months.

-Hatfield set the S&P 500 Index's year-end target at 9,000, based on falling interest rates and the 2027 corporate earnings outlook.

-The panelists identified airline and homebuilding stocks as short-term beneficiaries, and small-cap and mid-cap stocks as promising investments for the next 3-6 months.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*