Financial analysts from BMO Capital Markets and Deutsche Bank are anticipating a bullish surge in the stock market. The projections for S&P 500 (^GSPC) are to hit an unprecedented 5,100 by the close of 2024. This optimistic forecast, the loftiest among Wall Street strategists monitored by Yahoo Finance, would establish a fresh all-time high for the S&P 500, surpassing its previous peak of 4,796 in January 2022.
BMO’s Chief Investment Strategist, Brian Belski, expressed confidence in the upcoming years, stating, “We believe 2024 will be Year 2 of at least a 3-5 year process that will see US stocks exhibit more normal and typical performance, paced by a backdrop of normal and typical GDP and earnings growth, valuation, and bond yield ranges.”
According to Belski’s research, the S&P 500 historically yields an approximately 11% return in the second year of a bull market, aligning with his projection of 5,100 by the close of 2024. This estimate falls in line with the benchmark index’s historical averages.
Both Deutsche Bank and BMO anticipate the S&P 500 to achieve an earnings per share of $250 in the coming year, marking the most bullish projections for S&P 500 index on Wall Street to date. This upward revision in earnings estimates places both banks ahead of Bank of America and RBC, who predicted the S&P 500 to reach 5,000 in the preceding week.
Crucially, all four firms, including BMO and Deutsche Bank, share a positive outlook on the S&P 500’s ability to sustain a higher valuation than its historical norm, bolstered by anticipated robust earnings growth.
Deutsche Bank’s analysts underscored this sentiment, stating, “If earnings growth continues to recover as we forecast, valuations will remain well supported around the top of the range as is typical on the pricing in of a pickup in earnings growth,” in a note released on Monday.
Addressing concerns about a potential economic downturn, both BMO and Deutsche Bank remain optimistic about the stock market’s resilience. BMO’s Belski characterized a prospective recession as a “chicken little recession,” asserting that the ongoing strength of the labor market would prevent a substantial economic decline, deeming it a “recession in name only.”
Deutsche Bank’s team, while predicting a recession in the first half of 2024 with GDP growth falling to 0.6%, shares the belief that stocks will not experience a significant downturn. They anticipate only a modest and short-lived selloff, given the widely anticipated and expected mild nature of the recession.
Looking ahead from a sector perspective, Belski and BMO advised investors to diversify in 2024, emphasizing the need to own a “little bit of everything.” Belski highlighted the shift from the previous year’s “Magnificent Seven”-led rally and predicted that active investment strategies would be paramount in 2024. As some of the largest stocks lose momentum, investors are urged to explore opportunities further down the market cap spectrum.
Source: Yahoo Finance
