The S&P 500 is set for a fresh high in 2024 because US companies have adapted to higher rates and weathered macroeconomic jolts, according to Bank of America Corp. strategists who join a growing chorus of optimistic Wall Street forecasters.
The team led by Savita Subramanian is bullish on US equities for next year “not because we expect the Fed to cut, but because of what the Fed has accomplished.” “The market has absorbed significant geopolitical shocks already,” they wrote in a note on Tuesday, adding “US exceptionalism is intact.”
They see the S&P 500 closing at a record 5,000 by the end of 2024, which is 10% higher than Monday’s close. Next year will be “a stock picker’s paradise,” the strategists said.
Subramanian is in sync with some of Wall Street’s most-followed names, including Goldman Sachs Group Inc.’s David Kostin and Societe Generale SA’s Manish Kabra, who see the S&P 500 flirting with a record high. Barclays Plc strategists expect stocks to outperform bonds. Even Morgan Stanley’s Michael Wilson — a staunch Wall Street bear — turned more constructive in his view for the benchmark next year.
The S&P 500 has rallied 18% so far this year as confidence increased that the Federal Reserve would soon end its rate-hiking campaign while the economy stays resilient. The outlook for earnings also remains solid after the third-quarter reporting season showed the first profit recession since the Covid pandemic had ended.
The BofA strategists pointed to the bank’s own analyst survey, which suggests a Goldilocks environment — a steady economy that is not running too hot or too cold — as a reason for their optimism. Earnings can accelerate even if economic growth slows, said Subramanian, a quant who lifted her S&P 500 target to 4,600 in September after the sharp rally in 2023 left forecasts in the dust.
In early 2023, Subramanian was sanguine on stocks generally, though warned investors about pushing into the S&P 500 and missing opportunities elsewhere.
In a separate note this week, BofA’s technical strategist Stephen Suttmeier said US stocks have “much more upside potential” as they approach decisive bullish levels. He said there is more “buying power” left in institutional asset managers for a year-end rally, though Goldman strategists warned the recent rally increases the risk of disappointment in the near term.
Subramanian said data show that most investors are still broadly pessimistic. “Bull markets typically end with high conviction and euphoria — we are far from that,” according to the Nov. 21 note.