Stock Market Outlook: Wall Street’s Top Bear Reverses and Now Sees S&P 500 Hit 6,000

With the S&P 500 index setting record after record, Evercore ISI predicts another double-digit rally through the end of 2024.

Julian Emanuel, the firm’s chief quantitative and equity strategist, raised his year-end S&P 500 forecast to 6,000, the highest among top equity strategists tracked by Bloomberg, and about 10% above the level. closing of the indicator on Friday. This is a radical reversal by one of Wall Street’s most prominent bears, who previously expected the indicator to end the year at 4,750.

Optimism about a resilient economy, improving corporate profits and the end of the Federal Reserve’s tightening cycle have sent the S&P 500 up 14% this year, and Emanuel says declining inflation and fervor for Artificial intelligence will drive stocks even further. Emanuel’s new estimate surpasses the 5,600 level that David Kostin of Goldman Sachs Group Inc., Jonathan Golub of UBS Group AG and Brian Belski of BMO Capital Markets are estimating.

“The pandemic changed everything,” Emanuel wrote in a note to clients on Sunday. “Record stimulus, high cash balances and low leverage support the consumer. Then came AI. Today, the potential of GenAI across jobs and sectors is changing. The context of slowing inflation, the Federal Reserve’s intention to cut rates and growth support Goldilocks.

Emanuel also raised his estimate of the index’s earnings per share in 2024 and 2025 to $238 and $251, respectively. The new levels imply earnings growth of 8% and 5%, he said.

The S&P 500’s jump to 6,000 in late December with earnings per share of $238 will lift the gauge’s price-earnings multiple to 25 in tracking terms, Emanuel said. While it’s definitely elevated by historical standards, it’s still below the 28 level during the dot-com peak, Emanuel said. He sees the possibility of the 500-member index reaching 7,000 by the end of 2025, he added.

While AI exuberance has pushed valuations “into the top decile since 1960,” S&P 500 price-earnings multiples can remain elevated for “prolonged periods,” Emanuel said.

The move comes after Goldman’s Kostin on Friday raised the firm’s year-end target for the S&P 500 for the third time, reflecting Wall Street’s optimistic outlook for earnings growth and the U.S. economy. Among Wall Street’s big banks, JPMorgan Chase & Co. has the lowest year-end target for the S&P 500, 4,200, implying a drop of more than 20% from Friday’s closing level.

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