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Wall Street Just Gave Its Highest S&P Forecast
Wall Street High Mark for Stock Market Returns in 2024 continues to rise.
BMO Capital Markets chief investment strategist Brian Belski raised his year-end price target for the S&P 500 (^GSPC) to 5,600 from 5,100 in a research note on Wednesday, noting that market momentum is “likely to persist.” Belski’s target of 5,600 reflects an upside of about 7% from Monday’s close.
“We are comfortable with this because we believe the market is behaving similarly to 2021 and 2023 – years in which we did not give enough credit to the strength of market momentum, something we are trying to avoid this time around,” Belski wrote. in a research note.
Belski is the latest in a string of Wall Street strategists to chase a stock market rally in 2024 with beefed-up year-end targets. The street’s upper limit entering the year was 5,200, with the strategist’s median target at 4,850.
But the gains have grew more than analysts expected this year and US economic growth surprised largely to the positive side. Ten of the 15 strategists tracked by Yahoo Finance are now at 5,200 or higher on year-end targets.
The rise in shares occurred when investors aggressively reassessed their expectations for interest rate cuts from the Federal Reserve this year. After signs emerged that inflation is not falling as quickly as economists expectedInvestors are now pricing in about two interest rate cuts this year, down from a peak of nearly seven in early January, according to Bloomberg data.
This is in line with the Fed’s most recent Summary of Economic Projections (SEP), which showed that the majority of employees I saw the central bank cut interest rates two or three times 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 beginning of the year,” Belski wrote.
Charging Bull bronze sculpture in the financial district of Manhattan, New York, United States, on October 23, 2022. The sculpture was created by Italian artist Arturo Di Modica after the Black Monday stock market crash of 1987. (Beata Zawrzel /NurPhoto via Getty Images) (NurPhoto via Getty Images)
He recognizes that there will be bumps along the road to action. Using historical analysis, Belski believes that the market has probably not yet seen the worst decline of the year. Belski’s work shows that the average pullback during the second year of a bull market is 9.4%. The recent April pullback only reached just over 5%.
But given the recovery of the index in relation to the April lowsBelski is “now convinced that if a more severe pullback occurs, it will likely occur at higher index levels than we previously anticipated,” providing a higher landing point for the S&P 500 following a rebound.
The story continues
And with the level of strength seen in stocks at the start of the year, history says there are likely to be more gains ahead. In years when the S&P 500 rises more than 8% in the first five months of the year, as is currently happening, the index gains more than 7% to end the year 70% of the time, according to Belski.
“Based on historical trends, such strong performance at the beginning of the year is likely to continue through the end of the year,” Belski wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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