Wall Street strategist remains optimistic about the summer stock market despite signals of economic slowdown.

Despite signs of cooling in the labor market and a slowdown in economic activity, mainstream Wall Street strategists remain optimistic about the performance of the summer stock market. Over the past month, several institutions have maintained their year-end target for the S&P 500 index in the range of 6300-6500 points, believing that the most severe phase of tariff impact may have passed. As of the close of Monday, the benchmark index was at 6010 points, down about 2% from its historical high. Morgan Stanley's Chief Investment Officer Mike Wilson pointed out in a report that earlier this year, the S&P 500 index experienced a nearly 30% deep correction, and the expectation of "mild growth slowdown" may have already been fully priced in by the market. "Historical experience shows that stock market trends often lead economic data and earnings results by 6-12 months," Wilson emphasized, "current stock prices already reflect expectations of economic weakness." Recent economic data has indeed shown weakness: private sector employment added only 37,000 people in May, reaching a new low in over two years; initial jobless claims rose to a high not seen since October 2024; and revised nonfarm employment data for March-April decreased by 95,000 jobs from the initial values. However, Goldman Sachs' chief U.S. stock strategist, David Kostin, pointed out that this slowdown was already expected. Nevertheless, this slowdown in the data was already widely anticipated. The Goldman Sachs equity research team analyzed past "event-driven recessions" (such as the bursting of the dot-com bubble and the interest rate shocks of the 1970s) and found that so-called soft economic data (including consumer surveys and other data points) often bottom out before hard economic data (such as monthly inflation data or new employment data). This situation has been ongoing for the past month. In May, the World Federation of Large Enterprises' future expectations index saw the largest monthly increase since May 2009. However, in data released this Monday, the inflation expectations in the monthly survey by the Federal Reserve Bank of New York saw their first decline of the year in May, perhaps indicating that the most serious inflation concerns sparked by tariffs are gradually fading. Kostin's research shows that even as hard economic data like monthly employment reports continues to decline, the S&P 500 index typically rises as soft data feedback improves. Kostin wrote, "Currently, the correlation between the S&P 500 index's returns and soft data is higher than that of hard data." He predicted that the S&P 500 index will reach 6,500 points in the next 12 months. "If the recovery trend in soft data can be maintained, then even with weak hard data performance, it should be able to support stock market returns.'' Citigroup's U.S. stock strategy head Scott Chronert recently raised the S&P 500 target from 5800 points to 6300 points. The core logic lies in the significant reduction of trade uncertainty after the temporary suspension of additional tariffs between the U.S. and China. His team's monitoring showed that in early May, U.S. economic growth rate expectations fell to a yearly low of 1.35%, but with the easing of tariff risks, the market's consensus for 2025 economic growth rate has now risen to 1.4%. Despite acknowledging the potential risks posed by rising interest rates and high valuations, strategists like Chronert believe that as long as the economic slowdown does not exceed expectations, growth sectors represented by large technology stocks still have allocation value. "The AI theme has regained investment attention, and our preference for growth stocks remains unchanged," he wrote. The Goldman Sachs Kostin team also pointed out that historical patterns show that even with continued weakness in hard data, as long as soft data continues to improve, the stock market still has the potential for support. All institutions unanimously emphasize that if core economic indicators such as future employment and consumption deteriorate beyond expectations, market logic may change. But for now, the dual support of easing trade tensions and improving soft data is becoming an important basis for strategists to maintain their optimistic expectations.