Despite this year's consistent decline in stock prices, with all three major indices falling into a bear market, there's still an upside case to be made for stocks.

That's according to DataTrek Research co-founder Nicholas Colas, who told clients in a Tuesday note that a combination of factors, including a peak in inflation and interest rates, could drive stocks higher heading into 2023.

"Cautious as we are about the near-term direction of US/global equities, it always pays to consider the other side of the trade," Colas said, adding that the market typically looks six months out when pricing securities.

The first factor investors need to see to gain confidence in higher stock prices is a true peak in inflation, as well as its influence on the Federal Reserve's monetary policy.

# What does inflation mean to you?

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