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BMO’s Brian Belski raised his price target on the S&P 500 to 6,100, suggesting 7% upside potential by year-end.
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The Fed’s rate cut and favorable seasonal numbers support the optimistic view.
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Belski cites increasing market growth and a likely soft landing of the US economy as important factors to watch.
BMO’s Brian Belski is the most bullish equity strategist on Wall Street.
In a note on Thursday, Belski raised his 2024 price target for the S&P 500 to 6,100, implying a potential upside of 7% over the next three months.
Belski’s previous price target for the S&P 500 for 2024 was 5,600.
A combination of factors, including the Federal Reserve’s 50 basis point rate cut on Wednesday, made Belski even more bullish on stocks.
“As with our last hike target in May, we continue to be surprised by the strength of market gains and again decided that more than an incremental adjustment was needed,” Belski said.
Belski said favorable seasonal data suggests the stock market will finish the year strongly in the fourth quarter, “especially now that the Fed has moved into an accommodative mode.”
Since 1950, there have been eight years in which the S&P 500 rose about 15% to 20% in the first nine months of the year.
According to Belski, the S&P 500 averaged about 6% fourth-quarter returns over those years. That’s about 50% higher than the average fourth-quarter return for all years.
Belski also finds it encouraging that recent stock market gains haven’t just been concentrated in mega-cap technology stocks.
Instead, the stock market rally is spreading to other sectors and smaller companies.
“We expect this trend to continue and support future market gains even as the price and fundamental performance of Mag-X shares continue to slow in the coming months,” Belski said.
Finally, Belski said the higher valuations are justified given the increasing likelihood of a soft landing for the U.S. economy.
Based on Belski’s price target of 6,100, this implies a price-to-earnings ratio of 24.4x, which is above historical averages.
“We continue to believe that a soft landing is the most likely economic scenario. As a result, the current environment is most comparable to that of the mid-1990s, a period when the index maintained a multiple of more than 20x for several years,” Belski said.
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