Due to growing inflation, Evercore ISI expects the market will break out of its downtrend.

According to Julian Emanuel of Evercore ISI, stocks might start grinding upward when inflation peaks.

He cites a positive trend that began in 1994, when equities and bonds both fell at the same time.

“The market simply sort of absorbed it, and there was a lot of sideways chop,” the firm’s senior managing director told CNBC’s “Fast Money” “There was a lot of bearishness” on Monday.

It paved the groundwork for a major market breakout over the next four years.

“At the end of the day,” Emanuel said, “profits carried the day.” “We see that when we think about ’22 and ’23 because we don’t believe there will be a recession.”

According to Emanuel, the benchmark 10-year Treasury Note rate will end the year at 3.25 percent. The yield started the week at 2.85 percent, the highest it has been since December 2018.

According to market bulls, strong consumer spending would strengthen the economy.

“On balance, margins haven’t shrunk because pricing power has remained,” Emanuel explained.

Despite this, Wall Street is at a three-decade low in terms of optimism.

The most current AAII Investor Sentiment Survey is mentioned by Emanuel. In the week ending April 13, bears outnumbered bulls by about three to one. According to Emanuel, the results represent a big contrarian indication.

‘From an asset market standpoint, it’s a question of can you manage through what’s already in the price,’ Emanuel said. “As bad as the external conditions have been overseas, and as slowing as they are today in China, the American consumer remains intact.”

As earnings season unfolds, he doubts corporate America will issue inflation estimates.

“You won’t hear that from corporations.” “They don’t have to take that risk in terms of direction,” Emanuel added. “We don’t think they’ll be overly cautious because they haven’t seen the evidence in person.”

Emanuel’s year-end forecast for the S&P 500 is 4,800, up 9% from Monday’s close.