S&P 500 to end 2023 up 17% but little gains seen between now and year end: Reuters pollh

S. stocks will eke out only marginal gains between now and year end, according to strategists in a Reuters poll on Wednesday, who said inflation and higher interest rates were among the biggest risks for the market.

The benchmark S&P 500 index (.SPX) was forecast to end the year at 4,496, about 2.2% above Monday's close of 4,399.77 and up about 17% from end 2022, according to the median forecast of 41 strategists in an Aug. 9-22 Reuters poll.

The latest prediction was higher than the 4,150 year-end target in a May poll.

Some expect optimism over artificial intelligence that has driven a sharp rally in technology stocks this year to support further market gains, while they said a cooldown in the U.S. economy may not be as bad as feared.

The S&P 500 is up over 14% so far in 2023 after falling 19% in 2022, and the Nasdaq (.IXIC) is up 29% year-to-date.

Eight of 13 strategists who answered an additional question said a correction in the U.S. stock market was likely by the end of this year, and two said it was highly likely.

Confidence that the Federal Reserve has reined in inflation enough to end its rate hikes has fueled stock market gains this year. However, concerns that the U.S. central bank will keep interest rates higher for longer have recently pushed up U.S. Treasury yields, and fanned worries about the impact of higher borrowing costs on businesses and consumers.

The benchmark 10-year Treasury yield hit near 16-year highs this week.

"The S&P 500 may currently be in correction mode," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. His year-end target on the S&P 500 is 4,600.

"Persistent inflation is kryptonite to valuation as it implies a higher-for-longer Fed hawkish stance. Elevated interest rates, due to continued inflationary pressures, results in lower present values and lower stock prices," he said.