(Bloomberg) — The stock market’s furious run that has sent the S&P 500 Index flying 20% this year is far from over, according to BMO Capital Markets.
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Brian Belski, the firm’s chief investment strategist, raised his 2024 year-end forecast for the US equities benchmark to 6,100 — the highest target among Wall Street targets tracked by Bloomberg — from 5,600 previously. The S&P 500 closed Wednesday at 5,618, and Belski sees another 9% gain for before the end of 2024. The market is already cooperating, with the index rising 1.7% at midday Thursday, putting it on track for a new record closing high.
Belski, one of few soothsayers to correctly call the rally last year, is lifting his outlook for the second time this year. Strategists’ average year-end target stands around 5,523, according to data compiled by Bloomberg.
“We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” he wrote in a note to clients Thursday.
Belski attributed his bullish view to the Federal Reserve’s shift to policy easing and market participation that has improved beyond the so-called Magnificent Seven technology stocks that up until recently were the S&P 500’s primary drivers.
Thursday’s rally comes after a dismal start to September, with the S&P 500 dropping more than 4% in the first week of the month and the tech-heavy Nasdaq 100 Index losing almost 6%. With traders encouraged by the Fed’s aggressive interest rate cut Wednesday, the Nasdaq 100 is soaring 2.8%, while the small-cap Russell 2000 Index climbs 1.8% and heads for a seventh-consecutive winning session.
There have been just eight instances since 1950 that the S&P 500 has gained between 15-20% in the first nine months of a year, and the average fourth-quarter return during those years was about 6%, per BMO data. That’s roughly 50% higher than the average fourth-quarter return for all years.
Wall Street equity strategists have been relatively quiet through the summer after bumping up their S&P 500 forecasts in tandem as US stocks soared in the first half of the year, with target increases from Goldman Sachs Group Inc., UBS Group AG, and Citigroup Inc. Now, BMO is the latest firm to ratchet up its prediction for US stocks after strategists at Deutsche Bank AG did so last week. After Belski, Evercore ISI strategist Julian Emanuel has the second-highest S&P 500 forecast at 6,000.
BMO expects a soft landing for the US economy and says the current market backdrop resembles the mid-1990s, when US stocks were able to sustain high multiples for years through the dot-com bubble. However, the firm stuck with its S&P 500 earnings per share projection of $250 for 2024, indicating that “fundamental and macro underpinnings have remained essentially the same.”
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