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Wall Street Is Getting Even More Bullish on Stocks
Nearly five months until 2024, major stock indexes are close to records.
Wall Street also does not consider this recovery to be over, as the outlook for profits and economic growth has increased steadily throughout the year.
Over the past two weeks, three stock strategists tracked by Yahoo Finance have raised their year-end targets for the S&P 500. The median target on Wall Street for the benchmark index now stands at 5,250, above the median target of 4,850 on December 30, according to data from Bloomberg. The high street target also rose from 5,200 to 5,600 at the start of the year.
“The current environment is basically what the bulls expected, and they are getting it,” Ohsung Kwon, U.S. and Canadian equity strategist at Bank of America, told Yahoo Finance. “It’s basically a soft landing.”
Kwon explained that although inflation data came in hotter than expected at the beginning of the year, it was still did not indicate that price increases are reaccelerating. About that, other data signaled a slowing but strong economy, alleviating fears that accelerated growth could trigger another spike in inflation. In essence, this fed into the soft landing narrative that Wall Street bulls were hoping for heading into the year, according to Kwon.
BMO Capital Markets chief investment strategist Brian Belski noted that markets made an important shift as this data arrived. Markets are now pricing in about two rate cuts this year, down from a peak of nearly seven at the start of the year, according to Bloomberg data. This aligns with the Fed’s most recent projectionsin which authorities favored two or three rate cuts this year.
“It has become clear to us that we underestimated the strength of market momentum, especially given that investor expectations and Fed policy guidance have become essentially aligned relative to the significant disconnect that existed at the start of the year,” Belski wrote in a research paper. note on May 15th.
Atmosphere in and around Wall Street and the New York Stock Exchange in the Financial District of Lower Manhattan, New York City, on June 14, 2020. (zz/STRF/STAR MAX/IPx) (zz/STRF/ STAR MAX/IPx)
On that note, Belski raised his year-end target from 5,100 to 5,600 – a new high on Wall Street. He noted that with the level of strength seen in stocks at the start of the year, history says there are likely to be more gains in the future. In years when the S&P 500 rises more than 8% in the first five months of the year, as it just did, the index gains more than 7% to finish the year 70% of the time, according to Belski’s analysis of historical data .
Belski and other strategists who have upgraded their outlook for stocks this year have warned, however, that the stock rally likely won’t happen without more setbacks. Belski noted that April’s 5% pullback was weak compared to the usual 9%-plus seen in the second year of bull markets.
The story continues
But given the rally in stocks earlier in the year, “if a more severe pullback occurs, it will likely occur at higher index levels than we previously anticipated,” Belski said, providing a higher landing point for the S&P 500 following a rebound .
‘Optimistically speaking’
Heading into the year, bullish strategists on Wall Street were inflexible that the key to the market’s recovery this year would be a continued recovery in corporate profits. And so far, that has happened. Profits grew 6% in the first quarter of 2024, the highest growth rate seen in nearly two years.
So far, what’s driving profits hasn’t changed significantly. Technology gains, such as Nvidia’s explosive quarter last Wednesday, are driving most of the earnings growth in the S&P 500. But strategists believe the seeds for a stretch to the end of 2024 still exist.
Kwon noted that the first stage of the AI cycle is already happening with earnings growth at companies like Nvidia (NVDA) as well as tech giants like Alphabet (GOOG, Google), Amazon (AMZN) and Microsoft (MSFT) invest in growing technology. But the rewards are starting to expand with recent rallies in sectors such as utilities and energy.
“We no longer think it’s just about Nvidia,” Kwon said. “Things are broadening out… into energy, commodities, utilities, things like that.”
Kwon noted in a recent research note that Nvidia drove 37% of the S&P 500’s earnings growth last month. Over the next 12 months, it is expected to represent just 9%.
Deutsche Bank chief equity strategist Binky Chadha also believes other areas of the S&P 500 should contribute to robust earnings growth through the end of the year. He recently raised his target on the S&P 500 to 5,500 from a previous target of 5,100, but told Yahoo Finance that target has clear “upside risks.”
On the one hand, Chadha notes that although people are “talking optimistically,” equity positioning hasn’t changed much in the last three months. Deutsche Bank’s positioning measure shows that investors are “overweight” equities, but not at the “extreme” levels seen in 2021 and 2018.
For Chadha, this shows that there could be more room to compete in the shares, especially given that he feels the consensus is not currently valuing outperformance for the US economy.
Chadha highlights that expectations for the US economy have just changed an approaching recession for growth at or below the normal trend. If this consensus continues to rise and the US economy returns to growth more than expected this year, in the middle of what some believe it could be a productivity boom For the U.S. workforce, it’s not hard to see the S&P 500 hit 6,000, according to Chadha.
“We’ve come a long way, but it feels like we’re not all the way,” Chadha said.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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