The highest level of stock price predictions for 2024 has risen again.
Christopher Harvey, Wells Fargo's head of equity strategy, raised his year-end target for the S&P 500 Index (^GSPC) to 5,535 from 4,625 in a note to clients on Monday. This marks the highest call for the S&P 500 by year-end among strategists surveyed by Yahoo Finance and reflects an increase of about 6% from the benchmark average's opening price on Monday.
Harvey believes the current market moment is allowing investors to hedge against the possibility of stock valuations being too high amid a market rally, giving stocks room to rise further.
“The bull market, AI's secular growth story, and index concentration have shifted investor attention away from traditional relative valuation metrics and toward long-term growth and discount metrics,” Harvey wrote. “As a result of this long-term optimism, investor metrics have lowered and the horizon beyond 2023 appears to have lengthened.”
Mr. Harvey is the latest in a series of strategists to raise their expectations for this year's S&P 500 index, aiming to keep pace with the stock market's strong start to 2024. He noted that U.S. economic growth has exceeded expectations since his team released the report. The outlook for 2024 announced in November shows positive signs for corporate growth.
But given that the S&P 500 index has risen about 9% this year with no significant declines, the index's next rally likely won't come as quickly for investors, Harvey and other strategists said. points out.
Early signs of this were last week as stocks fell, the 10-year Treasury yield (^TNX) hit its highest level since November, and the CBOE Volatility Index (^VIX) posted its biggest weekly gain in more than six months. It appears from something. .
“While we think there is some upside potential for stocks going forward, we still expect volatility to spike.” [the first half of 2024] meanwhile [second half of 2024] A “melt-up” is increasingly likely, driven partly by political outcomes that support increased M&A and partly by an expected multi-year easing cycle that supports risk-taking. Yes,” Harvey wrote.
Harvey pointed out that his base case has several important risks. One is a resurgence in inflation, which would change the Fed's current outlook for rate cuts in both 2024 and 2025. The other is a rise in bond yields, with the key being seen as key for the 10-year Treasury yield to remain above 5% for six months. head wind.
Bond yields have risen sharply recently, but the yield on the 10-year note was hovering around 4.43% on Monday, well below the 5% level that Harvey had flagged as a cause for concern.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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