With the S&P 500 hitting record after record, Evercore ISI expects another double-digit gain by the end of 2024.
Julian Emanuel, the firm’s chief equity and quantitative strategist, raised his year-end forecast for the S&P 500 to 6,000, the highest among major equity strategists tracked by Bloomberg. The closing level was about 10% higher. In a U-turn, one of Wall Street’s most prominent bears had predicted the index would reach 4,750 by the end of the year.
Optimism about economic resilience, improving corporate profits and the end of the Fed’s tightening cycle has pushed the S&P 500 up 14% this year, and Emanuel said falling inflation and the artificial intelligence boom will push stocks further higher. Emanuel’s new forecast topped 5,600 points from Goldman Sachs Group Inc.’s David Kostin, UBS Group AG’s Jonathan Golub and BMO Capital Markets )’s Brian Belski’s predictions.
“The pandemic has changed everything,” Emanuel wrote in a note to clients on Sunday. “Consumers are supported by record stimulus, rising cash balances and low leverage. Then comes artificial intelligence. Today, GenAI’s potential is being realized in every job and sector. Against the backdrop of slowing inflation , the Fed’s intention to cut interest rates and increase growth is a support for Goldilocks.
Emanuel also raised his 2024 and 2025 earnings per share forecasts to $238 and $251, respectively. He said the new levels would mean profit growth of 8% and 5%.
Emanuel said the S&P 500 will jump to 6,000 by the end of December, with earnings of $238 per share, which would lift the index’s price-to-earnings ratio to 25 times on a trailing basis. Emanuel said that while it was certainly an improvement by historical standards, it was still below the level of 28 during the dot-com bubble. He added that he expected the 500-member index to potentially reach 7,000 members by the end of 2025.
Emanuel said that while the artificial intelligence boom has pushed valuations to the “highest decile since 1960,” the S&P 500’s price-to-earnings ratio is likely to remain elevated “for an extended period of time.”
Earlier, Goldman Sachs’ Kostin raised the firm’s year-end target for the S&P 500 for the third time on Friday, reflecting Wall Street’s optimistic outlook for profit growth and the U.S. economy. Among the big Wall Street banks, JPMorgan Chase set its lowest year-end target for the S&P 500 at 4,200 points, which would represent a drop of more than 20% from Friday’s closing level.