It\u2019s that time of year on Wall Street.<\/p>\n
The big show analysts are putting your money where their mouth is and plotting a myriad of upbeat forecasts for CY24, wherein equity markets break various records.<\/p>\n
Deutsche Bank has come out as the Bull\u2019s Bull this year, foreseeing the benchmark US index, the S&P 500, doggedly gaining more than 11% to close out what would be a record year.<\/p>\n
The S&P 500 is up close to 19% so far this year. And that\u2019s just Deutsche\u2019s conservative case.<\/p>\n
According to DB\u2019s in-case-of-Goldilocks-break-glass-case case,<\/em> analysts are seeing the S&P500 clamber on up to +5,500 points \u2013 which is a full fifth more than where the benchmark closed last night.<\/p>\n In a Monday note surely dropped to set the tone heading into the last week of November on Wall Street, Deutsche Bank backed\u00a0 US corporate earnings to stand tall, expecting resilience even in the scenario where the US wanders off briefly into recession territory.<\/p>\n The bank forecasts company earnings on the US benchmark to rise 10% in 2024, even factoring in a \u201cmild, short\u201d US recession.<\/p>\n If all goes well, on the other hand, it\u2019ll be a circa 19% rise, should US gross domestic product (GDP) grow 2%.<\/p>\n The investment bank set its 2024 year-end S&P 500 target at 5,100, or more than 11% above where it\u2019s currently sitting and about 8.5% higher than the 4,700 median forecast of analysts polled by Reuters.<\/p>\n \u201cIf earnings growth continues to recover as we forecast, valuations will remain well supported around the top of the range as is typical on the pricing in of a pickup in earnings growth,\u201d Deutsche predicts<\/p>\n If US consumer prices also returned to pre-COVID levels without crunching US economic growth then this scenario would also support equity markets in the States, according to Deutsche, since it\u2019d imply The US Fed wouldn\u2019t start trimming the cash rate unless the US was in recession.<\/p>\n The Street has all but locked in the odds (CME\u2019s FedWatch says it\u2019s at 99.4%) that the Fed will keep its hiking cycle on pause next month, with bets around a rate cut for mid-2024.<\/p>\n But the bank said either scenario is a moderate assumption when compared with where the index is trending.<\/p>\n \u201cWe note that the S&P 500 has been in a clear trend up channel since the GFC (Circa 2008)\u2026. After falling below last year, the rally in the first half this year took it back up to the bottom and it has been muddling along at the lower end since. A continued muddle through along the bottom implies 5300 by end 2024, while a move to the middle to 6000.<\/p>\n \u201cBy comparison, our base case target of 5100 and even the upside scenario of 5500 look conservative,\u201d DB added.<\/p>\n That kind of thinking rates Deutsch\u2019s forecast above and beyond some of Wall Street\u2019s other recent 2024 crystal balling. US stocks are forecast by Goldman Sachs Research to enjoy but a modest return next year, \u201cas above-consensus economic growth is partly offset by high equity valuations.\u201d<\/p>\n The S&P 500 index is expected to rise to 4700 by the end of next year GS says, representing a price gain of about 5% and a total return of around 6% including dividends.<\/p>\n Goldman\u2019s economists\u2019 forecast for US GDP growth of 2.1% in 2024 \u201cis already reflected in stock prices.\u201d Source: FactSet, Goldman Sachs Research<\/em> \u201cOur macro forecasts imply a benign outcome for equities, but the current starting point will limit the potential appreciation for the benchmark US equity index in 2024,\u201d Goldman Sachs Research chief US equity strategist David Kostin wrote in the GS 2024 US Equity Outlook (lovingly called \u201cAll You Had To Do Was Stay.\u201d) Kostin points out that the S&P 500\u2019s price-to-earnings ratio trades in the 87th percentile since 1976. And while the Federal Reserve has likely finished hiking rates during this cycle, GS economists expect it\u2019s unlikely the central bank will cut rates until the last quarter of 2024.<\/p>\n By comparison GS notes, the multiple for the S&P 500 aggregate index is higher than for the equal-weight index. Source: FactSet, Goldman Sachs Research<\/em> Bank of America\u2019s Savita Subramanian recently called for a year-end target of 5,000, as did RBC\u2019s Lori Calvasina.<\/p>\n Goldman Sachs\u2019 David Kostin expects the S&P 500 will chop around and finally end next year at 4,700.<\/p>\n On the same theme, BMO Capital Markets says any Wall Street rally would be broad-based next year amid a more compelling, \u201cnormal for longer\u201d trend.<\/p>\n A Monday note from BMO chief investment strategist Brian Belski includes a BMO Capital Market S&P 500 base case scenario for 2024 at 5,100pts so BMO sees a circa 11.5% bump from Friday\u2019s close.<\/p>\n That\u2019d be a slowdown in market growth on calendar 2023, which he believes will be difficult to repeat based on historical bull market trends. The recent gains for the benchmark US index recently took traders beyond BMO\u2019s previously forecast 2023 base range of 4,550.<\/p>\n After a technical analysis of recent historical bull market trends, Belski says there are gains to made, but of a calmer, more evenly distributed nature.<\/p>\n \u201cWe believe US stocks will attain another year of positive returns in 2024, albeit while demonstrating more sanguine, broadly distributed, and fundamentally defined performance relative to the last decade or so. In other words, normal and typical.\u201d<\/p>\n In the face of uncertainty, Belski remains broadly bullish on equities and Wall Street in general.<\/p>\n \u201cI still believe that the US stock market is the best equity asset in the world\u2026You don\u2019t have to own everything, just be very selective.\u201d GS analysts expect the S&P 500 index gains to be concentrated in second half of 2024.<\/p>\n \u201cResilient economic growth in the beginning of the year will force the market to push back its current pricing that Fed cuts will begin in the second quarter,\u201d Kostin writes.<\/p>\n \u201cUS election uncertainty will suppress risk appetite. Later in the year, the first Fed cut and resolution of election uncertainty will lift US equity prices.\u201d<\/p>\n The massive outperformance of a handful of mega-cap tech stocks has been a defining feature of the equity market in 2023.<\/p>\n Kostin points out that the risk-reward for mega-cap tech stocks isn\u2019t especially attractive given expectations are already elevated.<\/p>\n Part of Goldman\u2019s concern here is that hedge fund ownership of the great ones is higher than usual, \u201cand there\u2019s potential for an \u2018inflection\u2019 for AI enthusiasm among stock investors\u201d.<\/p>\n Kostin says this could be a risk to the mega-cap family.<\/p>\n \u201cGenerative artificial intelligence could potentially drive higher-than-expected growth in company earnings, but in most cases AI is expected to have limited impact on profitability next year.\u201d<\/p>\n Goldman predicts the so called Magnificent 7 will collectively outperform the remainder of the index in 2024, but not like we\u2019ve just seen.<\/p>\n \u201cYou\u2019ll get slightly better returns from the seven leading stocks, but not nearly the dramatic difference that you\u2019ve had this year,\u201d Kostin said at a media roundtable event two weeks ago. Source: Compustat, Goldman Sachs Research<\/em><\/p>\n \u00a0<\/p>\n Jim Caron, CIO Portfolio Solutions at Morgan Stanley Investment Management, says the narrative for 2024 is shaping up to be a year with easing financial conditions, namely lower bond yields and rising equities.<\/p>\n \u201cAnalysts are predicting that, firstly, inflation is likely to keep falling, secondly the Fed, ECB and other central banks are priced to cut interest rates and finally, global equities may return in the 5-7% area as a soft-landing\/no-recession call for next year is becoming more mainstream.<\/p>\n \u201cIf all of this turns out to be true, then volatility will fall, carry and income strategies will perform well, as will stocks and bonds. Perhaps it\u2019s time for broad financial asset markets to uniformly perform well and make a comeback?<\/p>\n In his latest poddy<\/a>, Caron says:<\/p>\n \u201cWell \u2013 as LL Cool J once said \u2013 \u2018Don\u2019t call it a comeback.\u2019<\/em>\u201d<\/p>\n \u201cSo as we look for returns in 2024, it won\u2019t come easy in 2024. The path may be very volatile and filled with surprises along the way. This means we are likely to see both great buying and selling opportunities and this may provide chances to perform better than what 2024 may actually deliver.\u201d<\/p>\n Caron also says he\u2019s still optimistic on the outcome for returns in the year ahead.<\/p>\n \u201cInvestors should establish a baseline view and actively manage a multi-asset portfolio around that view.\u201d I think it\u2019s very likely that we see a soft landing, which to me includes the possibility of a mild recession.<\/em><\/p>\n If interest rates have peaked, then owning stable cash flows will be more highly valued. <\/em><\/p>\n The starting yield in bonds is much more attractive and provides a greater cushion than a year ago.<\/em><\/p>\n The earnings trough that people are worried about is likely behind us. <\/em><\/p>\n We also likely saw two consecutive quarters of negative earnings growth in H12023 and now we are likely set on a path towards positive earnings growth in the US<\/em><\/p>\n \u00a0Investors should start with a well-balanced portfolio and actively manage the risks and opportunities<\/em><\/p>\n \u201cWe have fat tails ahead of us, both up and down, and should play them against the middle for a modestly positive return in 2024,\u201d Caron adds.<\/p>\n \u00a0<\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the writer and do not represent the views of Stockhead.<\/em><\/strong><\/p>\n Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.<\/em><\/strong><\/p>\n <\/span><\/p>\n The post Wall Street\u2019s best and brightest are already taking bets on where we\u2019ll end next year<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\n\u00a0<\/p>\nGoldman Sachs Research: Forecast gains for S&P 500 Index, 2024<\/h2>\n
\n\u00a0<\/p>\nGS: The S&P 500 index is expected to rise to 4700 by end 2024<\/h2>\n
Shaded area shows GS forecast<\/em><\/p>\n
\n\u00a0<\/p>\nGS: Aggregate stock multiples are high<\/h2>\n
\n\u00a0<\/p>\nAggregate Vs. equal-weight S&P 500 P\/E<\/strong><\/h2>\n
Shaded area shows GS forecast<\/em><\/p>\n
\n\u00a0<\/p>\nGS says Mega Tech \u2018may not be worth the risk\u2019<\/h2>\n
\n\u00a0<\/p>\nMag\u2019 7 market cap share of S&P500 at all-time high: GS<\/h2>\n
\n\u00a0<\/p>\nCaron\u2019s call for \u201924<\/h2>\n