The highest level of stock price predictions for 2024 has risen again.
Christopher Harvey, Wells Fargo's head of equity strategy, raised his year-end target for the S&P 500 (^GSPC) from 4,625 to 5,535 in a new note to clients on Monday. This marks the highest call for the S&P 500 by year-end among strategists surveyed by Yahoo Finance and reflects an increase of about 6% from the benchmark average's opening price on Monday.
Harvey believes the current market moment is allowing investors to hedge against the possibility of stock valuations being too high amid a market rally, giving stocks room to rise further.
“The bull market, AI's secular growth story, and index concentration have shifted investor attention away from traditional relative valuation metrics and toward long-term growth and discount metrics,” Harvey wrote. “As a result of this long-term optimism, investor metrics have lowered and the horizon beyond 2023 appears to have lengthened.”
Mr. Harvey is the latest in a string of strategists to raise their expectations for the S&P 500 index this year, as the strategists look to match stocks' strong start to 2024. He noted that U.S. economic growth has exceeded expectations since his team's announcement. The outlook for 2024, released in November, is a positive sign for the company's growth.
But Harvey and other strategists say the next rally in the S&P 500 may not materialize as quickly for investors, given that the S&P 500 has risen about 9% this year with no significant declines. It is pointed out that it is expensive.
Early signs of that were seen last week, when stocks fell after the 10-year Treasury yield (^TNX) hit its highest level since November, and the CBOE Volatility Index (^VIX) fell by more than half a year in a week. This was the highest rate of increase for the first time in history. .
“While we think there is some upside potential for stocks going forward, we still expect volatility to spike.” [the first half of 2024] meanwhile [second half of 2024] A “melt-up” is increasingly likely, driven partly by political outcomes that support increased M&A and partly by an expected multi-year easing cycle that supports risk-taking. Yes,” Harvey wrote.
Harvey points out that his base case has several important risks. One is a resurgence in inflation, which would change the Fed's current expectations for rate cuts in both 2024 and 2025. The other is rising bond yields, a headwind seen as key if the 10-year Treasury yield stays above 5% for six months.
Bond yields have risen sharply recently, but the yield on the 10-year note was hovering around 4.43% on Monday, well below the 5% level that Harvey had flagged as a cause for concern.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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