Here is latest investment strategy update from Sam Stoval, Chief Investment Strategist at the Center for Financial Research and Analysis (CFRA). Please reach out to us if you would like to discuss it.
Overall Outlook
To no one’s surprise, the Federal Open Market Committee (FOMC) left key interest rates unchanged, implying that the recent oil spike may just be a speed bump rather than a brick wall.
Specifically, the FOMC’s Survey of Economic Projections was revised, showing increases in median 2026 and 2027 Real GDP forecasts, while raising projections to year-over-year Core Personal Consumption Expenditures.
We continue to think that the FOMC will remain on hold until 2H 2026, as the outcome of the Iran war’s impact on oil prices remains uncertain.
Indeed, the interest rate futures market is pricing in one or no additional cuts this year. Even though CFRA thinks the market is underestimating the duration of elevated oil prices, we are maintaining our recommended asset allocation. History shows – but does not guarantee – that when the S&P 500 churns below its all-time high for an extended period before falling into a pullback (a decline of 5.0% to 9.9%), any subsequent decline does not exceed 20%.
Economic Update
Following today’s (March 18th) release of the hotter-than-projected January Producer Price Index’s 0.7% increase on a month-over-month basis versus the 0.3% expected gain, economic reports scheduled for later this week should include a decline in Building Permits for January to 1.376M from 1.455M in December, as well as a slide in January New Home Sales to 722K from December’s 745K reading. Leading Indicators are expected to have slipped in January by 0.1% versus December’s drop of 0.2%.
Finally, the Atlanta Fed’s GDPNow forecast for Q1 2026 growth is projected to come in at 2.7%.
Fundamental Update
After posting 13.3% growth in Q4 2025 EPS, the S&P 500 is projected to show an 11.4% Y/Y increase in Q1 2026, according to S&P Capital IQ consensus estimates, led by Information Technology (41.4%), Real Estate (19.9%), and Financials (14.5%).
For full-year 2025, S&P 500 EPS are projected to have risen 12.8% Y/Y, followed by a 14.5% increase in 2026 and 16.5% growth in 2027. Full-year 2026/2027 gains for the S&P MidCap 400 and S&P SmallCap 600 are now seen at +17.6%/+17.7% and +20.0%/+20.8%, respectively.
In addition, the S&P 500 Growth Index will likely post a 23.1% increase for 2026 and a 20.6% gain in 2027. Meanwhile, the S&P 500 Value Index should record a gain of 7.5% in 2026 and then accelerate with a 13.0% rise in 2027.
Finally, the S&P 500’s P/E on forward 12-month EPS stands at 21.3x, an 8.1% premium to its 10-year average.
Technical Update
Although our measures of Demand in the market remain solid, Supply has begun to expand. This leaves stocks vulnerable in the near term, and we have clearly seen an increase in volatility this month, according to Lowry Research, a CFRA business.
Now, with several of the major and minor indices landing on potential levels of fresh Demand (i.e., support) and/or 150-DMAs, we see no reason to shelve our positive longer-term outlook.
From a short-term perspective, the Percent of NYSE Stocks below 10-DMAs reached semi-oversold levels (<25%) this week. Meanwhile, the Percent of OCO Issues Above 30-DMAs, while not yet semi-oversold (also <25%), has already dipped to a level that was “oversold enough” to spark new buying over the past few months.
Neither indicator guarantees that buyers will be attracted, but they do create a better environment for some buyers to return.
Sam Stovall, CFP
Chief Investment Strategist
This report was prepared by CFRA and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and there is no guarantee of future results. All indices are unmanaged and may not be invested in directly. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
The opinions voiced in the material are for general information only and are not intended to provide specific advice or recommendations for any individual.
CFRA is not affiliated with LPL Financial, Independent Advisor Alliance, or Bass Financial Management.
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