Wall Street's 2024 Outlook for Stocks

Stock markets rose last week, with the S&P 500 gaining 0.8% to close at 4,594.63. The index is now up 19.7% year-to-date, 28.4% from its October 12, 2022 closing low of 3,577.03, and down 4.2% from its January 3, 2022 record closing high of 4,796.56.

As the year draws to a close, Wall Street's top strategists are sharing their insights on where they see the stock market heading in 2024. Typically, the average forecast for the group predicts the S&P 500 climbing by about 10%, in line with historical averages.

This year, however, strategists are offering a wide range of views, with targets ranging from 4,200 to 5,500. This implies potential returns between -8.5% and +19.7% from Friday's close.

Key Factors Driving Market Outlook

1. Economic Growth: Economists have varying views on whether the U.S. economy will enter a recession in 2024. Those expecting continued expansion forecast modest growth, while those anticipating a recession believe it will be brief and mild.

2. Earnings Growth: Most strategists expect S&P 500 earnings to grow in 2024 despite lackluster GDP growth forecasts. This may be due to expectations of a shift in consumer spending from services to goods and the S&P's greater exposure to the goods sector.

3. Profit Margins: Many strategists expect profit margins to remain high, supported by improved operating efficiencies. However, rising interest rates could pose a headwind for earnings growth.

4. Monetary Policy: Strategists agree that the worst of the inflation crisis is behind us. This suggests that the Federal Reserve may have room to loosen financial conditions with interest rate cuts if economic conditions deteriorate significantly.

5. Valuations: Strategists are divided on whether valuations are reasonable or slightly high. The debate is unlikely to go away soon, as valuations have historically provided little insight into short-term market moves.

Strategists' 2024 S&P 500 Price Targets

Below is a summary of 12 analysts' S&P 500 price targets for 2024, along with highlights from their commentary:

Firm

Target

EPS Estimate

Commentary

JPMorgan

4,200

$225

Sees modest economic growth, eroding excess savings, and tightening credit as headwinds for earnings growth.

Morgan Stanley

4,500

$229

Expects a recovery in earnings growth next year.

UBS

4,600

$228

Anticipates a mild recession in the middle of the year and a credit market sell-off in Q2.

Wells Fargo

4,625

$235

Expects a volatile and ultimately flattish SPX in 2024.

Goldman Sachs

4,700

$237

Sees modest economic growth, 5% earnings growth, and a valuation of 18x.

Societe Generale

4,750

$230

Expects a roller coaster year with a mild recession in the middle of the year.

Barclays

4,800

$233

Expects single-digit returns as easing inflation is offset by modest economic deceleration.

Bank of America

5,000

$235

Sees further gains in 2024 as the market has absorbed significant geopolitical shocks.

RBC

5,000

$232

Remains constructive on the U.S. equity market despite a sluggish economy and election uncertainty.

Deutsche Bank

5,100

$250

Believes valuations are not high and expects earnings growth to continue.

BMO

5,100

$250

Expects a year of positive returns with more sanguine, broadly distributed performance.

Knightsbridge

5,200

-

Sees potential for further gains driven by enthusiasm for AI technology.

Conclusion

While most strategists produce high-quality research, their one-year price targets should not be taken as definitive

Shayne Heffernan