THE OPTIMIST’S CALL

Tony Dwyer, equity strategist at Canaccord Genuity, sees the S&P 500 finishing 2016 at 2360, or 14.4% higher than Wednesday’s close. (Dwyer was also the most bullish forecaster at the start of 2015 with a target of 2340.) Dwyer is betting that Fed rate hikes won’t result in major headwinds, like an even stronger dollar. The Fed says it plans on raising rates at a “measured” pace next year after hiking rates a quarter-point in mid-December, its first increase since 2006. Dwyer’s work shows that following rate-hike cycles in 1994 and 2004, the dollar declined more than 10% after an initial spike. A rising dollar acted as a headwind for stocks in 2015, as it hurt the competitiveness of U.S. companies abroad.

“Expect a weak U.S. dollar following rate hike,” Dwyer said in a recent report.

A decline in the dollar will pave the way for a rebound in commodities, Dwyer believes.

“That should lead to (a) ramp (up) in oil and copper prices,” Dwyer noted, as it did following rate-hike cycles in 1994 and 2004.

“This is important to the stock market because of the pressure weak commodities has put on credit markets,” Dwyer wrote. “Dramatic improvement in energy and basic industry corporate credit should go a long way in aiding the upside for equities.”

Dwyer also thinks fears in credit markets are “overblown” and are not suggesting a recession is coming.