TLDR:
- S&P 500 has rallied 22% in 2024, the strongest since 1997
- Wall Street analysts are rapidly increasing their year-end forecasts
- UBS raised its 2024 S&P 500 target to 5,850, Goldman Sachs to 6,000
- Strong rally attributed to resilient economy and AI-driven tech stocks
- Potential risks include US election, Middle East conflict, and Fed policy uncertainty
The S&P 500 index has been on a remarkable upward trajectory in 2024, surprising many Wall Street analysts and forcing them to revise their year-end forecasts.
The benchmark index has gained 22% this year, marking its strongest performance by this point since 1997.
This unexpected rally has led to a flurry of activity among financial strategists, who are now rushing to update their projections.
Several major financial institutions have recently increased their year-end targets for the S&P 500. UBS raised its forecast to 5,850, up from 5,600, while Goldman Sachs bumped its projection to 6,000.
BMO Capital Markets now has the most optimistic outlook, predicting the index could reach 6,100 by year-end.
The strong performance of the stock market can be attributed to several factors. The U.S. economy has shown surprising resilience, defying earlier predictions of a potential recession.
Corporate profits have also remained robust, further fueling investor confidence. Additionally, there has been significant investor interest in technology stocks, particularly those expected to benefit from advancements in artificial intelligence.
This rally has caught many analysts off guard, similar to the situation in 2023 when the S&P 500 jumped 24%. The rapid rise in stock prices has created what some are calling a “strategist short squeeze,” where experts are forced to quickly revise their outlooks to keep pace with market realities.
Despite the overall positive sentiment, there are still potential risks on the horizon. The upcoming U.S. presidential election in November could introduce market volatility.
Ongoing conflicts in the Middle East present geopolitical uncertainties.
There is still some ambiguity surrounding the Federal Reserve’s monetary policy, especially after recent hotter-than-expected job market and inflation data.
The S&P 500 recently hit its 46th closing record of the year. This impressive run has led some analysts to speculate that the index could reach “well north of 6,000” by the end of 2024.
Historical data suggests that the period from mid-October to the end of December often sees strong market performance, especially in election years.
Institutional investors are reportedly shifting their strategies from defensive hedging to more aggressive positioning. This change is partly driven by a fear of underperforming benchmark equity indices, a sentiment referred to as “FOMU” (fear of materially underperforming).
The coming weeks are expected to be crucial for the markets. A significant portion of S&P 500 companies are scheduled to report their quarterly earnings, which could further influence market direction.
The end of the corporate buyback blackout period on October 25th could inject more capital into the market, as U.S. corporations have been the largest buyers of U.S. equities in 2024.
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