US stocks have staged a monster rally in recent weeks, fueled by a confluence of factors.
The easing of macroeconomic pressures, coupled with positive economic indicators, has brought fresh optimism into the market. Notably, the Federal Reserve’s plan for interest rate cuts in the coming year has especially contributed to the fervor.
The S&P 500, emblematic of this bullish trend, has experienced eight consecutive weeks of gains, closing in at 4,774.50 on December 26, just 0.6% shy of its all-time high set in January 2022.
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As we approach the end of 2023, Finbold delves into recent analysts’ predictions, looking for clues on whether the S&P 500 can expand its current momentum in 2024.
Bull cases
Earlier this month, analysts at Goldman Sachs raised some eyebrows with their notably bullish US stock market prediction.
To be more specific, the Wall Street giants hiked its 2024 S&P 500 price target by 8% to 5,100, citing tailwinds for equities from waning inflation and rate cuts.
In contrast to this year, when Big Tech accounted for the vast majority of the index’s gains, Goldman analysts believe the 2024 rally will be driven by cyclical sectors and companies with smaller market capitalizations.
“Looking forward, the new regime of both improving growth and falling rates should support stocks with weaker balance sheets, particularly those that are sensitive to economic growth.”
– the firm wrote.
Oppenheimer analysts have issued an even more bullish forecast, predicting the S&P 500 to surge to 5,200 by the end of 2024. That implies around 9% from the index’s current level.
Meanwhile, Citi and BMO Capital Markets strategists each have 5,100 targets, while Bank of America anticipates 5,000 by year-end.
Bear cases
Recent economic and market developments have significantly improved investor sentiment, and that has been evidently reflected in the stock market’s trajectory. However, it is clear that certain headwinds persist, and that’s why some of the Wall Street giants are not as bullish.
For instance, JPMorgan’s chief market strategist and co-head of global research, Marko Kolanovic, recently predicted that the S&P 500 will decline as low as 4,200 in 2024, suggesting about 12% downside. According to Kolanovic, risks such as decelerating global growth, declining household savings, and geopolitical issues are factors that could drive down the index.
Morgan Stanley took a more neutral stance, estimating a flat performance from the US stock market and setting the S&P 500 target at 4,500. The firm expects extremely narrow leadership of mega-cap tech giants to extend into early 2024, but eventually fall through.
BCA Research analysts issued one of the most bearish outlooks, saying the equity index could see one of its worst crashes since 2008 next year, citing recessionary risks.
“A recession in the US and euro area was delayed this year but not avoided. Developed markets (DM) remain on a recessionary path unless monetary policy eases very significantly. As such, the risk/reward balance is quite unfavorable for stocks.”
– BCA Research said.
The firm said these catalysts could push the S&P 500 as low as 3,300.
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