(Bloomberg) — The stock market’s meteoric rise, which has sent the S&P 500 index up 20% this year, is far from over, BMO Capital Markets said.
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Brian Belski, the firm’s chief investment strategist, raised his year-end forecast for the U.S. equity benchmark to 6,100 for 2024, the highest target among Wall Street targets tracked by Bloomberg, from 5,600 previously. The S&P 500 closed at 5,618 on Wednesday, and Belski sees another 9% gain by the end of 2024. The market is already cooperating, with the index up 1.7% on Thursday afternoon, putting it on track for a new record high.
Belski, one of the few fortune-tellers who correctly predicted last year’s rally, is raising his outlook for the second time this year. The average year-end target among strategists is around 5,523, according to data compiled by Bloomberg.
“We continue to be surprised by the strength of market gains and have again decided that more than an incremental adjustment was needed,” he wrote in a note to clients on Thursday.
Belski attributed his bullish view to the Federal Reserve’s shift toward policy easing and improved market participation beyond the so-called Magnificent Seven technology stocks that until recently were the main drivers of the S&P 500.
Thursday’s rally follows a dismal start to September, with the S&P 500 down more than 4% in the first week of the month and the tech-heavy Nasdaq 100 Index losing nearly 6%. With traders encouraged by the Fed’s aggressive rate cut on Wednesday, the Nasdaq 100 is up 2.8%, while the small-cap Russell 2000 Index is up 1.8%, edging toward a seventh straight winning session.
There have been only eight instances since 1950 in which the S&P 500 has risen between 15% and 20% in the first nine months of a year, and the average fourth-quarter return in those years has been about 6%, according to BMO data. That’s about 50% higher than the average fourth-quarter return for all years.
Wall Street equity strategists have been relatively quiet all summer after raising their S&P 500 forecasts as U.S. stocks rose in the first half of the year, with target increases from Goldman Sachs Group Inc., UBS Group AG and Citigroup Inc. Now BMO is the latest firm to raise its U.S. stock forecast, following strategists at Deutsche Bank AG last week. After Belski, Evercore ISI strategist Julian Emanuel has the second-highest S&P 500 forecast of 6,000.
BMO expects a soft landing for the U.S. economy, saying the current market environment resembles that of the mid-1990s, when U.S. stocks were able to maintain high multiples for years during the dotcom bubble. However, the firm stuck to its S&P 500 earnings per share projection of $250 for 2024, indicating that “fundamental and macroeconomic underpinnings remain essentially the same.”
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