Traders on the floor of the NYSE, Jan. 10, 2022.
Market bull Julian Emanuel sees a dot-com era dynamic that could shatter the S&P 500's record highs.
In his first TV interview since starting at Evercore ISI, Emanuel told CNBC's "Fast Money" an emotionally charged public could drive the index to 5,509 this year.
"They really haven't committed sort of every last dollar in the way that was the case in '99 and '00," the firm's senior managing director of equity, derivatives and quantitative strategy said Monday. "If you get that kind of emotion, particularly if the pandemic turns endemic at mid-year, that's how you get that kind of overshoot."
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It is Emanuel's best case market scenario for 2022. The move implies an 18% jump from the current S&P 500 level and an 8% gain from his official 5,100 price target. The index's all-time high is 4,818.62.
"We've seen very vigorous participation for the last year and a half without actually the concurring emotions that you tend to get with that kind of participation," said Emanuel, who left BTIG in October.
According to Emanuel, the Federal Reserve would have to assure investors they would avoid derailing market rallies.
Money Report
"Ultimately to get stock prices to move to those kinds of extremes on the upside through our price target, you're going to need a perception that inflation is going to moderate," he said. "We actually do think it moderates later in the year, but stays high for an extended period."
Given strong earnings and economic momentum, Emanuel believes the broader market can withstand pricing pressures.
His worst case scenario implies the S&P 500 would fall to 3,575 this year. In his recent research note, Emanuel cited a prolonged pandemic — as well as a potential debt and spending "hangover" similar to the period after World War I and the 1918 flu epidemic.
In the meantime, Emanuel is sticking to his 2022 game plan. He prefers value stocks over growth, and sees trouble ahead for the Nasdaq due to high valuations and rising rates.
He believes industrials will get a bid from easing supply chain concerns and health care will insulate investors from tightening Fed policies.
Emanuel also likes financials.
"Those stocks still in comparison to their weighting are barely off their financial crisis lows," Emanuel said.
