S&P 500 forecast 2024. What to expect from the US stock index


22 December 2023 - 17:00

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2024 promises to be a year of modest growth for the stock market. Here are the S&P 500 index targets calculated by the main investment banks.

S&P 500 forecast 2024. What to expect from the US stock index

The 2024 forecasts for the S&P 500 are now known: the main investment banks paint a varied picture, with a mix of optimism and caution reflecting the complexity of global events and ever-changing market dynamics.

Projections from major players such as Citi indicate a probable rise, while JPMorgan, more cautious, foresees a potentially difficult macroeconomic scenario in the absence of timely interventions by the Fed.

In this complex landscape, the contrasting views of seven leading investment banks provide a comprehensive overview of what you can expect from the S&P 500 in 2024.

S&P 500, Citi’s 2024 forecast

According to Citi, the strong rally of the fourth quarter of 2023 is expected to continue into 2024, but investors must be ready to face changes in market conditions.

Scott Chronert, market strategist at Citi, expects the S&P 500 to be at 5,100 points by the end of next year but suggests that pullback could occur due to the changing outlook for the Federal Reserve. Citi has reduced its mid-2024 target to 4,800 points, assuming a possible slowdown in the economy.

According to Citi, successfully navigating 2024 will require a careful investment strategy, including growth stocks in addition to cyclicals, with a judicious selection of defensive stocks and small and mid-cap.

S&P 500, JPMorgan’s 2024 forecast

JPMorgan launches a negative forecast on the S&P 500. Among investment banks, it is the one with the most defensive forecast with an expected drop of 8% and a target price at 4,200 points for the benchmark index.

At the heart of JPMorgan’s concerns are a difficult macroeconomic scenario for next year, a slowing in consumption, and the absence of rapid monetary easing from the Federal Reserve. According to the bank, the possibility of an economic recession in 2024 remains on the table.

Source: FactSet JP Morgan

S&P 500, Goldman Sachs’ 2024 forecast

Goldman Sachs looks optimistically to 2024 and expects the S&P 500 to close at 4,700 points, with a modest gain of 6% including dividends. The bank’s outlook is anchored in a projection of moderate economic expansion, with earnings growth of 5% and a valuation multiple of 18.

Goldman Sachs Research chief equity strategist David Kostin highlights the challenging valuation environment, with the S&P 500’s price-to-earnings ratio sitting at the 87th percentile compared to a record since 1976. Although the Federal Reserve has probably completed the rate hike cycle, Goldman Sachs believes a rate cut is unlikely until the last quarter of 2024.

Goldman Sachs S&P 500 forecast for 2024
Source: Goldman Sachs

The forecast is based on an initially flat market, with the expectation of returns concentrated in the second half of the year, fueled by rate cuts and the resolution of electoral uncertainties in the United States. Kostin acknowledges the outperformance of tech giants in 2023 but warns that the risk-reward ratio may not be as attractive in 2024, considering high expectations and high ownership by hedge funds. Goldman Sachs therefore suggests maintaining a cautious outlook, balancing growth expectations with the challenges related to high valuations and any changes in investor enthusiasm in the technology sector.

S&P 500, Morgan Stanley’s 2024 forecast

According to Morgan Stanley projections, the S&P 500 is expected to close 2024 at 4,500 points, showing modest growth of 2% from current levels. The bank has outlined alternative scenarios, with a worst-case scenario involving a decline to 3,850 points and a best-case scenario implying a rise to 5,050 points, with an expected total return of more than 4%, also considering dividends.

Morgan Stanley focuses on persistent short-term risks, particularly linked to the performance of cyclical sectors and sensitive to interest rate fluctuations. The recommended strategy is based on a defensive growth approach and investing in late-cycle stocks to mitigate any negative impacts.

Morgan Stanley strategists, led by Michael Wilson, expect a 7% increase in earnings per share (EPS) in 2024 for indexing companies, along with 4-5% revenue growth and moderate margin expansion, in the context of a reduction in labor costs.

However, Wilson warns that near-term earnings headwinds could persist into early next year before a more sustained recovery emerges. Looking ahead to 2025, Morgan Stanley projects a strong earnings environment, with a 16% increase, driven by technological innovation and margin expansion driven by artificial intelligence.

S&P 500, Bank of America’s 2024 forecast

Bank of America has set an optimistic target for the S&P 500, predicting a target of 5,000 points by the end of 2024. That projection indicates a 10% jump in the index from its current valuation, supported by growth of cyclical stocks compared to the “magnificent 7” (Apple, Microsoft, Alphabet (GOOGL), Amazon, Meta Platforms, NVIDIA and Tesla), whose P/E ratios are at extreme levels compared to other stocks in the benchmark.

The bank’s analysts spot signs of a maturing business cycle, predicting a decrease in equity risk premium as US companies streamline operations. An increase in efficiency, combined with advances in automation, will drive productivity higher.

BofA S&P 500 forecast 2024
Source: BofA

Bank of America’s basic economic scenario is a "soft landing", as anticipated by US economist Michael Gapen, with the Federal Reserve’s inflation falling towards the 2% target. Gapen expects consumer-led economic momentum, supported by the “strong financial position of US consumers.” This strength in consumption is expected to persist, even with a softer growth outlook.

Additionally, Gapen expects the Fed to begin cutting interest rates in June 2024, taking a cautious approach with cuts of 25 basis points per quarter through early 2026, navigating the post-COVID interest rate landscape. positive interest.

In terms of sector-specific guidance, Bank of America is overweight Energy, Consumer Staples, Financials, and Real Estate, while taking a cautious stance on Consumer Staples, Healthcare, and Technology. The latter was downgraded from market weight due to concerns related to regulation, valuation, and competition risks.

S&P 500, HSBC’s 2024 forecast

According to projections from HSBC Global Research, the S&P 500 is destined for further increases. Its current performance is below previous rallies that followed pauses in Federal Reserve rate hikes. Historically, the S&P 500 has experienced an average increase of 22% following similar monetary policy disruptions from the Fed.

The investment bank expects the impetus for this rally not to come primarily from P/E expansion, but rather from upgrade earnings estimate revisions. This suggests that the next phase of the rally will be driven by such earnings growth, rather than higher valuations. It should be noted that this increase in earnings estimates comes in an environment where expectations are already lower. The recent 5% cut in forecasts for the fourth quarter of 2023 provides companies with the ability to exceed those forecasts, according to HSBC.

The AI trend and positive signals from credit card spending indicate that the business outlook may not have significantly worsened. Ultimately, HSBC believes that in a macroeconomic environment characterized by stronger-than-expected growth and lower inflation, equities will have favorable ground to rise.

S&P 500, Oppenheimer’s 2024 forecast

Oppenheimer is particularly optimistic about the S&P 500’s outlook for next year, anticipating a backdrop of corporate earnings growth. The index is expected to reach 5,200 points by the end of 2024, with an increase of 13% from current values and an increase of 8.4% compared to the historic high recorded on January 3, 2022.

Chief investment strategist John Stoltzfus emphasized that while markets do not move linearly and setbacks are possible, those who demonstrate patience and perseverance should enjoy gains in the medium to long term. This forecast places Oppenheimer among the most bullish analysts on Wall Street, surpassing targets of other banks such as Citi and Bank of America.

Oppenheimer S&P 500 forecast 2024
Source: Bloomberg

Oppenheimer bases his confidence on an expectation of continued earnings and revenue growth during what he calls a “transition year,” characterized by the Federal Reserve abandoning its restrictive monetary policy. Stoltzfus predicts that despite possible rate changes early in the year, the Fed will move toward a rate cut by the fourth quarter of 2024.

The earnings per share forecast for the S&P 500 is $240, marking an increase of 9% compared to 2023. Oppenheimer favors cyclical stocks, especially in the technology, communication services, and consumer goods sectors, predicting a good return also for small and mid-cap stocks over the coming year.

The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since only he knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|

Original article published on Money.it Italy 2023-12-13 16:03:00. Original title: S&P 500, previsioni 2024. Cosa aspettarsi dall’indice azionario USA

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