• John Stoltzfus, the chief investment strategist at Oppenheimer Asset Management, said if the US can forge a trade deal with China, it could stop the Fed from potentially raising interest rates at its next meeting in July.
• Stoltzfus, one of Wall Street’s biggest bulls, said stocks are still a better investment than bonds, and this trend should continue “barring any unforeseen negative surprises.”
• The Fed maintained rates at its June meeting, sending stocks on a ride to record highs.
• President Donald Trump is expected to meet with Chinese President Xi Jinping at the Group of 20 Summit in Japan this week to discuss trade tensions.

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One of Wall Street’s biggest bulls thinks a trade deal between the US and China could push the Federal Reserve to delay to a rate cut in July.

John Stoltzfus, the chief investment strategist at Oppenheimer Asset Management, said the Fed will be looking closely at US-China trade talks when considering rate changes next month.

“We persist in believing that a resolution to the trade dispute is if not around the corner at the G-20 meeting in Osaka (at the end of this month) at least somewhere in the not too distant future (perhaps over the summer months),” Stoltzfus said in a note to clients on Monday.

Stoltzfus said that the Fed has been sensitive to the impact of increased tariffs and the trade war with China on the US economy when considering rate hikes. The Fed opted to keep rates steady during its June meeting, a decision that helped send the S&P 500 to a record high last week. Now, the consensus on Wall Street is that the Fed will lower rates up to three times this year, according to CME FedWatch data.

According to Stoltzfus, the market rally sparked by the unchanged fed funds rate could continue if the trade talks are successful. His year-end target for the S&P 500 is 2,960, above other major strategists’ median forecast of 2,950, according to Bloomberg data.

“Should a resolution take place we would expect stocks to rally further higher from these new record levels and for bonds to fall from their lofty levels (sending yields higher) pretty quickly as economic and corporate growth expectations stateside and around the world would likely be ramped higher,” Stoltzfus said.

Stoltzfus also said that stocks are still looking more attractive than bonds, and unless there’s a negative shock to the market, it should stay that way.

If the US can come to a deal with China, the Fed could end up raising rates again by the end of the year, according to Stoltzfus.

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