With the S&P 500 setting record after record, Evercore ISI forecasts another double-digit rally before the end of 2024.
Julian Emanuel, the firm’s chief equity and quantitative strategist, raised his year-end forecast for the S&P 500 to 6,000, the highest among major equity strategists tracked by Bloomberg and about 10% above the gauge’s close on Friday. That’s coming from one of Wall Street’s most prominent bears, who previously expected the number to end the year at 4,750.
Optimism about the strength of the economy, improving corporate earnings and the end of the Federal Reserve’s tightening cycle has driven the S&P 500 index up 14% this year, and Emanuel says falling inflation and enthusiasm for artificial intelligence will push stocks even higher. Emanuel’s new valuation exceeds the 5,600 level noted by Goldman Sachs Group Inc.’s David Kostin, UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belsky.
“The pandemic has changed everything,” Emanuel wrote in a note to clients Sunday. “Record incentives, increased cash balances and low leverage support consumers. Then came AI. Today, GenAI’s potential in every profession and sector is changing. With inflation slowing, the Fed’s intention to cut rates and economic growth supporting Goldilocks.”
Emanuel also raised his earnings per share estimates for the index in 2024 and 2025 to $238 and $251, respectively. The new levels suggest earnings growth of 8% and 5%, he said.
A jump in the S&P 500 to 6,000 by the end of December with earnings per share of $238 would push the price-to-earnings multiple to 25 on a trailing basis, Emanuel said. While that number is certainly higher by historical standards, it’s still below the level of 28 during the dot-com peak, Emanuel said. He sees the possibility of the 500-member index reaching 7,000 by the end of 2025, he added.
While the abundance of artificial intelligence has pushed valuations “into the top decile since 1960,” S&P 500 price-earnings multiples could remain elevated for “extended periods,” Emanuel said.
The move comes after Goldman’s Kostin raised his year-end target for the S&P 500 for the third time on Friday, reflecting Wall Street’s bullish outlook on earnings growth and the U.S. economy. Among the big Wall Street banks is JPMorgan Chase & Co. has the S&P 500’s lowest year-end target at 4,200, implying a drop of more than 20% from Friday’s close.