The stock market surprised Wall Street with a big rally last year, but it could surpass that with an even bigger rally this year.
The S&P 500 rose 24% in 2023, buoyed by a strong U.S. economy despite widespread recession predictions and a dovish shift in tone from the Federal Reserve last fall.
Only a handful of Wall Street analysts expected a rally of this size, and there was widespread skepticism about whether another jump in 2024 was possible. In fact, JP Morgan predicted S&P500 will plummet this year. On the other hand, Morgan Stanley usual year The profits are in the single digits, and double digit profits are never repeated.
Fast forward to today, and the S&P 500 is already up 23% so far in 2024, roughly matching last year's gains. This is despite expectations that the Fed's rate-cutting cycle has started later than expected and that the rate cuts are expected to be smaller this year.
The stock market rally wasn't fueled by the Fed's interest rate cuts; there were other catalysts as well. The economy is strong and continues to defy expectations, corporate profits are strong, and the AI boom is still going strong.
In recent weeks, Wall Street has warmed to the idea of even bigger gains. Earlier this month, David Kostin, chief U.S. equity strategist at Goldman Sachs, said the S&P 500 index would reach 6,000 by the end of the year and 6,300 a year later. This beat Goldman's previous forecast that the S&P 500 index would reach 5,600 by the end of the year and 6,000 in the next 12 months.
If the overall stock market index achieves its target, it will rise 26% for the year.
Jay Hatfield, CEO of Infrastructure Capital Advisors, has said for months that the S&P 500 index would end the year at 6,000. This assumes that the U.S. election will likely result in a divided government, leading to stable regulatory policies and cuts in government spending, he reiterated in a recent note.
And on Friday, Sandra Cho, founder and president of PointWealth Capital Management, said: told CNBC She thinks the S&P 500 index will end the year at about 6,000.
“We are in the soft landing camp,” she said. “We definitely feel the Fed has done a pretty good job. There have been some hiccups, but [it] “We've done a pretty good job of factoring in inflation and managing the landscape, especially with geopolitical events going on.”
Of course, not everyone is convinced that good times will continue. Nassim Nicholas Taleb wrote this book black swan Regarding unpredictability, he said the current environment is similar to the environment that existed during past financial collapses, leading to complacency in the market and teaching people to avoid conservative investments. He pointed to the early era of low interest rates.
Valuations are “insane” right now and many are building on their hopes, but the economy looks “very turbulent” as data has been giving mixed signals lately. he said. bloomberg tv Last Friday.
Similarly, my colleague Mr. Spitznagel recently warned that the failure of the yield curve to invert after years of inversion portends a larger inversion in the future as a recession approaches.
“That's when we enter black swan territory,” he said. bloomberg tv last month. “The black swans are always lurking, and now we are in their territory.”
