Wall Street's high figure for stock market returns in 2024 continues to rise.
BMO Capital Markets chief investment strategist Brian Belski raised his year-end price target for the S&P 500 (^GSPC) from 5,100 to 5,600 in a research note on Wednesday, noting that momentum in the market is “likely to continue.” Belski's target of 5,600 reflects an upside of about 7% from Monday's close.
“We feel comfortable with this because we believe the market will behave the same way it did in 2021 and 2023 – years in which we did not pay enough attention to the strength of market momentum, something we are trying to avoid this time ,” Belski wrote. in a research note.
Belski is the latest in a line of Wall Street strategists pushing the 2024 stock market rally to new heights with tightened year-end targets. The highest water level on the street at the start of the year was 5,200, with the strategist's average target at 4,850.
But profits have grown more strongly this year than analysts expected and U.S. economic growth has largely surprised on the upside. Ten of the fifteen strategists tracked by Yahoo Finance are now at or above 5,200 for their year-end targets.
The rise in stock prices came as investors aggressively adjusted their expectations for Federal Reserve rate cuts this year. After signs emerged that inflation is not falling as quickly as economists had hoped, investors are now pricing in roughly two rate cuts this year, down from a peak of nearly seven in early January, Bloomberg data show.
This is consistent with the Fed's most recent Summary of Economic Projections (SEP), which showed that most officials saw the central bank cutting rates two or three times this year.
“It has become clear to us that we underestimated the strength of market momentum, especially given that investor expectations and Fed policy guidance are largely aligned versus the significant gap that existed at the start of the year Belski wrote.
He acknowledges there will be bumps along the way for stocks. Based on historical analysis, Belski believes the market is unlikely to have seen its worst decline of the year yet. Belski's work shows that the average pullback during the second year of a bull market is 9.4%. The recent decline in April was only just over 5%.
But given the index's rally from April lows, Belski is “now convinced that if a more severe pullback were to occur, it would likely occur at higher index levels than we previously expected,” providing a higher landing spot for the S&P 500 after a restore.
And given the strength of the stock to start the year, history says further gains are likely in store. In years when the S&P 500 rises more than 8% in the first five months of the year, as is currently the case, the index gains more than 7% to end the year 70% of the time, Belski said.
“Based on historical trends, performance that is so strong at the beginning of the year tends to persist through the end of the year,” Belski wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for an in-depth analysis of the latest stock market news and events affecting stock prices.
Read the latest financial and business news from Yahoo Finance
