Despite recent economic wobbles, Wall Street analysts at Piper Sandler remain optimistic about stocks, particularly high-quality ones. They state that the unemployment rate still has room to climb before it triggers a broad market decline.
"We remain constructive on stocks," says Piper Sandler, despite the recent evidence that tightening monetary policy is impacting various aspects of the economy.
They acknowledge a shift in investor sentiment, with some market segments reacting negatively to bad news. This, according to Piper Sandler, suggests a growing concern about inflation versus unemployment.
Their client survey reinforces this view. "We agree with many of our clients who responded to our survey saying the unemployment rate that leads to a broad decline in equities is still a good deal above today's reading of 4.1%," Piper Sandler states.
Piper Sandler sees historically familiar culprits for market downturns: higher interest rates and unemployment. While acknowledging a more balanced risk profile compared to 2023, they downplay any immediate threat from either factor.
Assessing the survey, the firm believes investors won't hit the panic button until the unemployment rate climbs to 4.5%. Until then, Piper Sandler maintains a bullish outlook, especially for high-quality stocks.