Deutsche Bank strategists raised their year-end target to 5,500, up from a previous 5,100.
The revision is based on a strong earnings cycle and expectations that market confidence will rise towards the end of the year, which should have a positive impact on US equities.
“We see the earnings cycle as having many branches,” the strategists said in a note to clients on Friday.
“While all of the growth may not materialize this year, we see market confidence in a continued recovery towards the end of the year, which supports stock multiples.”
However, strategists also warned of potential market volatility due to geopolitical risks. Moreover, they warned that a protracted election poses a “real risk” to markets.
The brokerage firm noted that while growth may not materialize this year, market confidence in the continued recovery is expected to increase by the end of the year. These sentiments are predicted to be supported by stock multiples.
Along with the revised index target, Deutsche Bank also raised its base case scenario for S&P 500 earnings to $258 per share from a previous estimate of $250. This adjustment indicates annual growth of 13%.
If macroeconomic growth continues to beat trends, as it has over the past seven quarters, strategists estimate earnings could reach $271 per share, which is at the top of their original forecast range of $250 to $271.