(Bloomberg) — Bank of America's Savita Subramanian increments her target for the S&P 500 index to Wall Street's highest after this year's rally has blinded forecasters. This is the latest stock strategist trying to do that.
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Subramanian now expects the benchmark to end the year at $5,400, compared to his previous target of $5,000, implying an increase of about 5% from Friday's closing price. He said indicators are flashing bullish signals pointing to strong earnings growth and “amazing” margin resilience going forward.
“Bull markets end in euphoria. We are not there yet,” Subramanian, the bank's head of U.S. equities and quantitative strategy, said in a note to clients on Sunday. “Sentiment has improved, but the areas for euphoria are limited.”
BofA's 2024 S&P 500 price target of 5,400 currently ranks as one of the most bullish on Wall Street, according to about 20 sell-side strategists tracked by Bloomberg. She joins Ed Yardeni of Yardeni Research and Jonathan Golub of UBS Group AG, who both have similar year-end outlooks.
The artificial intelligence frenzy is surprising Wall Street forecasters and spurring a race among strategists to keep up with a stock market rally that is already exceeding their expectations. Piper Sandler & Co., UBS and Barclays have all raised their targets in recent weeks. Goldman Sachs Group Inc. and UBS have already raised their outlooks twice since December, following a dovish policy shift by the Federal Reserve.
The S&P 500 index closed above the important milestone of 5,100 for the first time in history on Friday, and the index had already surpassed the year-end average estimate of 4,899.40. Leading indicators argue for an upside of BofA's earnings per share estimates of $235, with a consensus of $243 appearing to be a “reasonable” expectation for stronger economic growth and higher profits, according to company strategists. He said it looks like.
The S&P 500 index is up 7.7% year-to-date after gaining 24% in 2023. The fourth quarter earnings season reaffirmed that corporate profits are improving. Of the 98% of benchmark market capitalizations reported so far, 76% have exceeded expectations.
Investors broadly rewarded stocks that beat expectations for both earnings and sales, with those stocks outperforming their benchmarks by a median 1.5% within a day of earnings, according to data compiled by Bloomberg Intelligence.
That said, Subramanian sees bullish sentiment building across Wall Street and the risk of a pullback in the short term. Consider the firm's sell-side indicator, which tracks the average recommended allocation to stocks by U.S. sell-side strategists. It rose slightly last month, moving closer to flashing a contrarian “sell” signal than a “buy” signal for the first time since April 2022.
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Piper Sandler's Michael Kantrowitz, one of Wall Street's most bearish prospects for U.S. stocks in 2023, raised his forecast for the S&P 500 index to 5,250 last month. The numbers echo some of his bullish peers, including John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, and Thomas Lee, head of research at Fundstrat Global Advisors. exceeds. Both men expect the S&P 500 index to reach 5,200 by the end of the year.
Even Morgan Stanley's Mike Wilson, one of Wall Street's most prominent bears, believes that the U.S. stock market rally is currently getting less love than the big tech companies that have dominated previous bull markets. We expect it to expand into fields where it is not currently available. His 2024 target remains 4,500, implying a decline of about 12% from Friday's close.
Subramanian argues that the S&P 500's rise is still concentrated in a small number of mega-capitalization stocks, while the difference in earnings growth among the so-called Magnificent Seven stocks, such as NVIDIA, Microsoft, and Metaplatforms, is significant. As we expand, we expect our leadership to expand further. The rest of the S&P 500, including Amazon.com, Apple, Alphabet, and Tesla, will begin to shrink.
Nvidia, Meta, Amazon and Microsoft beat profit estimates, while Tesla and Alphabet disappointed and Apple underperformed in China. Investors are mainly looking to earnings reports later this week, including those from Target Inc., Kroger Inc., Gap Inc. and Foot Locker Inc., for further clues about consumer health.
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