The stock market has carried forward the momentum seen in 2023, and optimism regarding another stellar year abounds on the Street. A market strategist on Sunday hiked the year-end price target for the S&P 500 Index, a broader gauge, to the highest on the Street.
What Happened: Evercore ISI chief equity and quantitative strategist Julian Emanuel expects the S&P 500 Index to finish 2024 at 6,000, Bloomberg reported. The index ended Friday’s session at 5,431.60, which translates to a gain of about 13.87% so far this year.
If Emanuel’s estimate proves to be accurate, the index is on track to gain another 10.5% for the remainder of the year. The S&P 500 Index ended 2023 with a commendable 25% gain.
Evercore ISI’s latest price target is a sharp bump up from the prior target of 4,750, which was among the most bearish estimates on the Street.
The firm also lifted S&P 500 earnings per share estimates for 2024 and 2025 to $238 and $251, respectively, translating to 8% and 5% growth. Financial data analytics company FactSet’s latest estimate shows that S&P 500 companies’ blended earnings per share growth was 5.9% in the first quarter. The firm expects the growth rate to accelerate to 9% in the second quarter.
The price-earnings multiple of the index will rise to 25 on a trailing basis based on Emanuel’s 6,000-year-end S&P 500 price target and the $238 earnings per share estimate. “While definitely elevated by historical standards, that's still short of the 28 level during the dot-com peak,” the analyst reportedly said.
The firm’s expects the buoyancy to continue in 2025, targeting 7,000 for the index by the year-end.
Emmanuel reportedly said the S&P 500 P/E multiple is likely to remain elevated for “extended periods,” thanks to the AI exuberance.
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Why It’s Important: Wall Street analysts have recently scrambled to revise their estimates for the S&P 500. The index hit fresh closing records in two successive sessions last week. On Thursday, it ended at a new high of 5,433.74, and a session before that it hit an intra-day high of 5,447.25.
On Thursday, Goldman Sachs upped its target for the index from 5,200 to 5,600, marking a third upward adjustment by the firm. In late May, Morgan Stanley’s Mike Wilson, one of the biggest bears, shed his pessimistic view and gave a year-end price target of 5,400, up from his previous prediction for a decline in the index to 4,500.
Wall Street’s optimism stems from the resilience shown by the economy in the face of elevated inflation and uncertainty concerning interest rate trajectory after the Federal Reserve took its key rate to a 22-year high of 5.25%-5.50%. Despite inflation showing signs of cooling off, the central bank seems to be fixated on bringing it below its 2% target. The May consumer price inflation report released last week showed headline and core year-over-year rates at 3.3% and 3.4%, respectively.
Emmanuel attributed his changed stance to ebbing inflation and artificial intelligence fervor that will likely propel stocks even higher.
“The pandemic changed everything…Record stimulus, elevated cash balances and low leverage support the consumer. Then came AI. Today, GenAI's potential in every job and sector is inflecting. The backdrop of slowing inflation, a Fed intent on cutting rates and growth support Goldilocks,” the strategist reportedly said in a note to clients.
The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the performance of the S&P 500 Index, ended Friday’s session up 0.06% to a record 542.78, according to Benzinga Pro data.
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