- Evercore ISI said it doesn't see a US recession coming, and stocks should rise in 2022 and 2023.
- Strategist Julian Emanuel compared today to 1994, when the Fed raised rates several times and stocks gained.
- The Fed's plan to tame inflation in 2022 by tightening monetary policy have heightened recession fears.
Many on Wall Street are concerned about the risk of a US recession as inflation soars, and the Federal Reserve hikes interest rates — but not Evercore ISI.
The investment advisory firm expects robust corporate earnings will be positive for the US economy, and stocks will shake off the doldrums and rise in 2022 and 2023, Evercore's Julian Emanuel suggested Monday.
The S&P 500 has fallen about 7% so far this year, as of Monday's close. The Dow Jones Industrial Average is down about 4.4%, while the Nasdaq Composite has lost 14%.
In an interview with CNBC's "Fast Money", the equity strategy leader compared today's situation with 1994, when the Fed embarked on a series of interest rate increases, and stocks gained in volatile action.
"You think about a year like 1994, which is a lot of the comparison — and actually the last year, the only year in the last 40, when both stocks and bonds were down for the whole year, as they are sitting here in mid-April — is that the market just sort of digested it," Emanuel said.
"There was a lot of sideways chop, there was a lot of bearishness. But at the end of the day, earnings carried the day — that's what we see when we think about '22 and '23. Because we don't think there's going to be a recession."
Many economists believe the Fed waited too long to start tackling surging inflation, which is now running at its hottest in four decades. Some have forecast a recession before the end of the year, as they see the Fed's tightening as slowing the economy so much it starts to shrink.
The central bank started ratcheting up its benchmark interest rate in March with a 25 basis point hike, and it is expected to raise rates at every one of its six meetings left in 2022. It also plans to shrink its balance sheet by $95 billion a month.
On Monday, St. Louis Fed President James Bullard said he wouldn't rule out a 75 basis point rate hike from the Fed this year, given how high inflation is. But Emanuel said the market has already priced in the central bank's plans, including Bullard's hawkish rhetoric.
"If you think about when those comments hit in the last 15 minutes or so of the day, what happened. Stocks love that, because they love the fact that the comment is in the price already. The market gets it," he said.
The Evercore strategist also said companies were unlikely to give negative inflation commentary in their earnings outlooks.
"Are you going to get peak commodity prices, peak inflation, as we think may be happening? You're not going to hear that from companies," he said.
"We don't think they're going to be very, very cautionary, because they really haven't seen the evidence concretely themselves."
