(Bloomberg) — The stock market’s furious run that has sent the S&P 500 index soaring 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 year-end 2024 forecast for the benchmark U.S. stock index 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% rise before year-end. The market is already cooperating, with the index up 1.7% as of midday Thursday, putting it on track for a new all-time closing high.
Belski, one of the few fortune-tellers who got last year’s rally right, is raising his forecast for the second time this year. Strategists’ average year-end target stands at around $5,523, according to data compiled by Bloomberg.
“We continue to be surprised by the strength of market earnings and decided once again that more than an incremental adjustment was necessary,” he wrote in a note to clients on Thursday.
Belski attributed his bullish view to the Federal Reserve’s shift toward policy easing and improved market participation beyond the so-called Magnificent Seven technology stocks that until recently were the main drivers of the S&P 500.
Thursday’s rally comes after a dismal start to September, which saw the S&P 500 fall more than 4% in the first week of the month and the tech-heavy Nasdaq 100 index lose nearly 6%. With traders encouraged by the Fed’s aggressive interest rate cut on Wednesday, the Nasdaq 100 soared 2.8%, while the small-cap Russell 2000 index rose 1.8% and was on track for a seventh straight session of gains.
Since 1950, there have been only eight instances where the S&P 500 has gained between 15% and 20% in the first nine months of a year, and the average fourth-quarter return during those years was about 6%, according to BMO data. That’s about 50% higher than the average fourth-quarter return for all years.
Wall Street equity strategists have been relatively quiet this summer after raising their S&P 500 forecasts as U.S. 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 boost its prediction for U.S. stocks after Deutsche Bank AG strategists 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 U.S. economy and says the current market environment resembles that of the mid-1990s, when U.S. stocks were able to maintain high multiples for years during the dot-com bubble. However, the firm maintained its S&P 500 earnings per share projection of $250 for 2024, indicating that “fundamentals and macroeconomic fundamentals have remained essentially unchanged.”
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