Wall Street Strategists Scramble to Update S&P 500 Projections Amid New Highs

Wall Street’s top strategists have been caught off guard by the stock market’s record-setting rally, leading many to quickly revise their year-end S&P 500 targets. In 2024, at least 11 firms have raised their forecasts, with BMO Capital Markets and Deutsche Bank recently increasing their targets to 5,600 and 5,500, respectively. BMO’s forecast, the most optimistic among major banks, suggests a potential rise of more than 5% from current levels.

As 2024 began, Wall Street expected modest gains after a strong 2023. Despite a brief dip in April, stocks have continued to climb, driven by significant gains in large-cap tech stocks, hitting multiple all-time highs. This surge has even turned notable bear Mike Wilson of Morgan Stanley bullish, now projecting the S&P 500 will reach 5,400 by mid-2025, a sharp shift from his previous forecast of 4,500 by year-end.

Currently, J.P. Morgan’s Dubravko Lakos-Bujas stands as one of the few remaining bears, with a year-end target of 4,200, indicating a potential 21% drop from current levels. The average year-end target from strategists is now 5,289, a slight decline from current levels, up from an earlier average of 5,117.

Despite some strategists revising their forecasts upward, Wall Street generally remains cautious due to the uncertain interest-rate environment. Andrew Greenebaum of Jefferies notes that historically, the S&P 500 performs well when Wall Street forecasts downside, averaging 6.3% gains over the next six months and 13% over the next year.

Bottom-up estimates, which aggregate median target prices from industry analysts, are more optimistic. FactSet’s John Butters projects an 11% increase in the S&P 500 over the next 12 months, with a target price of 5,856.09. Consumer discretionary and energy sectors are expected to see the largest gains, while utilities are forecasted to lag.

On Monday, U.S. stocks were mostly higher, beginning a quiet week for economic data. The Dow Jones dipped 0.5% after surpassing 40,000, while the S&P 500 rose slightly to 5,306, and the Nasdaq Composite increased by 0.6%.