Franklin Templeton strategist advises buying S&P 500 pullbacks

Chris Galipeau, head market strategist at the Franklin Templeton Institute, told Yahoo Finance that investors should prepare to buy pullbacks in the S&P 500 rather than chasing current prices. Speaking with Senior Reporter Brooke DiPalma, Galipeau described the current environment as a "volatility window" extending through September and October, driven by upcoming Federal Reserve meetings and midterm elections.

Galipeau characterized the macro backdrop as bullish, citing a strong earnings profile and the market's existing expectation that the Federal Reserve is likely to raise rates in December. While acknowledging factors such as rising bond yields and higher oil prices, he advised investors to stay the course. The strategist emphasized that the market has risen 14% year-to-date, yet the S&P 500 multiple has compressed to 18.5 because earnings growth has outpaced price increases.

The discussion centered on Franklin Templeton's year-end target for the S&P 500, which stands between 7400 and 7800. With the index closing at 7805, Galipeau noted that the market is currently at the high end of this range. He explained that providing a range avoids the "illusion of precision" associated with point targets. Galipeau admitted that the firm underestimated the strength of reported earnings entering the year.

Given that earnings per share have outpaced the price movement, Galipeau argued that the market has effectively become cheaper. He suggested that while the index is unlikely to "run away" from investors at current levels, the bias favors waiting for a dip to deploy capital. "Volatility is your friend," Galipeau stated, provided investors are prepared for it.