Bank of America predicts that S&P will close 2024 at 5,000
The good news is that investors have already been talking about possible bad news.
That's the message from Bank of America Global Research's equity strategy team led by Savita Subramanian, which sees the S&P 500 (^GSPC) reaching an all-time high in 2024, in a year that will be a "paradise for stock pickers."
The firm predicts that the S&P 500 will close 2024 at 5,000, approximately 10% higher than its current price, as markets have already surpassed "maximum macroeconomic uncertainty."
"We are optimistic not because we expect the Fed to cut, but because of what it has accomplished," Subramanian explained. "Businesses have adapted... to higher rates and inflation."
Bank of America forecasts earnings will grow 6% in 2024 to $235 per share. Subramanian's team had he previously told Yahoo Finance They not only believe that the earnings recession is over but that companies are prepared to excel even if the economy slows.
"Companies reduced costs and adapted to the weaker demand environment, and saw their profits grow again in the third quarter (+3% year-on-year)," Subramanian wrote. "History suggests that profits typically recover more than they fall, as recessions typically eliminate excess capacity, resulting in a tighter cost structure and better margin profiles."
Still, Subramanian's team believes the best path forward for stocks is for earnings to rise with positive GDP, matching The call from BofA economists for no recession in 2024.
Bank of America's call for stocks to rise as the economy edges into recession is in line with what Goldman Sachs detailed. in your own perspective for 2024. Both research teams made it clear that the worst-case scenario for stocks would be if the Federal Reserve's interest rate cutting cycle began and the economy headed into recession.
"Bulls should expect an improving economy, resulting in a looser credit cycle, rather than a dovish Federal Reserve driven by a weaker economy," Subramanian wrote.
