Wall Street’s top strategists have been blindsided by the stock market’s record-setting rally, leading many to swiftly revise their year-end S&P 500 targets. So far in 2024, at least 11 firms have increased their forecasts for the S&P 500.
Recently, BMO Capital Markets and Deutsche Bank raised their targets to 5,600 and 5,500, respectively. BMO’s forecast, the most bullish among major banks, suggests more than a 5% rise from Monday’s levels.
Entering 2024, Wall Street anticipated modest gains following a strong 2023. Despite an April dip, stocks have surged, driven by gains in megacap technology stocks, hitting multiple all-time highs.
This rally has even led Mike Wilson of Morgan Stanley, a notable bear, to turn bullish, projecting the S&P 500 will reach 5,400 by mid-2025, a stark shift from his previous forecast of 4,500 by the end of this year.
Currently, J.P. Morgan’s Dubravko Lakos-Bujas remains one of the few bears, with a year-end target of 4,200, indicating a potential 21% drop from Monday’s levels. The average year-end target from strategists is now 5,289, a slight decline from Monday’s levels, up from an earlier average of 5,117.
Despite some strategists revising forecasts upward, Wall Street generally maintains a cautious outlook due to the uncertain interest-rate environment. Andrew Greenebaum of Jefferies notes that historically, the S&P 500 performs well when Wall Street forecasts downside, averaging 6.3% gains over the next six months and 13% over the next year.
Bottom-up estimates, aggregating median target prices from industry analysts, are more optimistic. FactSet’s John Butters projects an 11% increase in the S&P 500 over the next 12 months, with a target price of 5,856.09.
Consumer discretionary and energy sectors are expected to see the largest gains, while utilities are forecasted to lag.
On Monday, U.S. stocks were mostly higher, beginning a quiet week for economic data. The Dow Jones dipped 0.5% after surpassing 40,000, while the S&P 500 rose slightly to 5,306, and the Nasdaq Composite increased by 0.6%.
