As you might’ve noticed, US equities are demonstrating an unshakable propensity to melt up into the summer heat wave currently threatening to melt down the planet.

Figurative and literal buy-in for some version of a Goldilocks/soft landing narrative for the US economy is growing. Indeed, according to the July installment of BofA’s fund manager poll, “soft landing” is the odds-on favorite outcome at this juncture, even as many professional investors remain broadly bearish.

As the second half dawned, I suggested Wall Street strategists would likely need to raise S&P targets soon if the rally refused to stall.

The figure above illustrates the situation as it stood at the beginning of this month.

That wasn’t (and isn’t) tenable. The only way you can stay “bearish and wrong” on stocks in perpetuity as a Wall Street strategist is if you’re the house clown who everyone, including and especially clients, knows not to take seriously. Generally speaking, those aren’t the people with the house S&P call. Simply put: You can’t just sit around and pretend a selloff is imminent forever if your job is to forecast the likely trajectory of a benchmark index that rises over time.

With that in mind, Credit Suisse’s Jonathan Golub raised his S&P target to 4,700, a mere 4% above current levels. We’re a couple of solid mega-cap tech reports and one dovish turn of phrase from Jerome Powell away from hitting that target.

Maybe stocks grind sideways into year-end. Maybe they give back H1’s rally which, you’re reminded, was predicated entirely on multiple expansion. I’m not someone who’s inclined to unabashed optimism. My point, rather, is that far from being outlandish, Golub’s new SPX target is really just a mark-to-market exercise.

2023’s rally is “not altogether unjustified, given the economy’s improvement, a decline in near-term recession risk and strong positive revisions in the largest TECH+ names,” he wrote. “Following a five-quarter TECH+ EPS recession, profits for the group are expected to add meaningfully to growth through year-end 2024.”

Obviously, big tech multiples are elevated, but it’s worth considering the possibility that results from America’s tech titans could suggest this year’s re-rating wasn’t entirely irrational. Or they could suggest the opposite. We’ll see soon enough.

Golub also noted that although valuations are elevated at 19x for the index, “they appear more reasonable relative to bond yields.”

His base case is for no recession and for inflation to stay sticky at or near “current levels,” which could mean “incrementally tighter” monetary policy. That’s a kind of “no landing” outcome, although Golub didn’t use that term.

The figure above shows you the assumptions that go into the new forecasts. Golub also lifted his EPS call for this year and next.

He briefly mentioned downside and upside risks. On the former, he noted that stretched multiples and subdued volatility historically have capped equity gains. In addition, the bank flagged nascent evidence of credit contraction, and mentioned the possibility of spillovers from China’s economic malaise.

As far as a right-tail outcome, Golub said simply, “A more rapid decline in inflation could lead to greater Fed dovishness.”