The dollar will drive stocks this year as investors shift from growth companies to ones whose valuations have been hampered by currency moves, said Barry Bannister, head strategist at Stifel Nicolaus & Co.

The transition into value stocks from growth industries may be more significant than any possible gains for the broader market, he said.

“The S&P 500 may continue to rotate from industries that had been rising with the dollar to those that now rise if the dollar falls,” Bannister said in a May 17 report obtained by Newsmax Finance. “2015 may be more remarkable for sector rotation than market gains.”

The S&P 500 stock index rose about 4.5 percent from percent from July to March as the dollar strengthened and commodities including gold fell. Industries that benefited from the dollar’s purchasing power included health providers, biotechnology, airlines and retailers, while energy, machinery and miners lost value.

The dollar may weaken as the economies of other countries strengthen, Bannister said, and the demand for oil recovers. Also, the dollar bull market is about seven years old, making it due for a pullback.

“Without dollar relief, we believe the S&P 500 earnings per share outlook is quite poor,” he said. “A 10 percent year-over-year decline in the dollar may help energy, technology, industrials materials (and financials) outperform healthcare, staples, discretionary and utilities by about 15 percent in the next 12 months.”

Bannister also forecast that the Federal Reserve will be cautious about raising interest rates, especially as it faces greater congressional scrutiny that may intensify during election season.

“The current Fed leadership has no desire to cause (be blamed for) a recession before the November 2016 national elections, and will tread carefully,” he said, adding that he expects a 25-basis-point hike in interest rates by the third quarter of this year.

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