US stocks could surge 8% by July

The S&P 500 rose 1.4 percent last week, its fourth consecutive positive week, to end at a record high.

Phil Orlando, chief equity market strategist at Federated Hermes, told CNBC on Friday that stocks could surge another 8 percent by July.

“First quarter earnings are coming in very strong. Looks like we could be up 30% year over year. The earnings recession is over,” said Orlando.

“In the second quarter, which will enjoy the full benefit of some of this fiscal stimulus, we could be looking at an earnings growth rate twice that on a year over year basis,” he added.

However, Orlando was concerned that inflation could pick up pace in the latter half of the year, which might cause the Federal Reserve to adjust its easy monetary policy.

“Right now we’re just going to have to watch and wait and make our best judgment later in the year,” he said.

There is a problem with waiting for clarity, though: many investors may reach the same conclusion at the same time.

This was highlighted by John Hussman, president of Hussman Investment Trust, in a commentary last week.

“My impression is that the next material market decline may take the form of a 25-35% air-pocket, driven by nothing more than the sudden concerted effort of overextended investors to sell, and the need for a large price adjustment in order to induce scarce buyers to take the other side,” he wrote. “Such a decline would not require a recession.”