The S&P 500 accumulates an increase of 14.5% so far this year after last week it conquered new historical highs and flirted at times with 5,500 points.
A level that will not only be reached but surpassed, according to Goldman Sachs analystswho have recently raised their 2024 closing target for the index to 5,600 points, from the previous 5,200 points. The reasons, the strong earnings growth of mega-cap technology giants and a higher multiple of the price/earnings ratio to fair value.
Microsoft, NVIDIA, Alphabet, Amazon and Meta (Facebook) have collectively risen 45% and now represent 25% of the S&P 500’s market capitalization, the firm highlights, boosting the index. “Among the factors driving the rally are upward revisions to consensus 2024 earnings estimates for these same technology companies and expansion in valuations stemming from increased investor enthusiasm for artificial intelligence (AI).” , explain the analysts.
“The (US) elections remain a key risk for the S&P 500 level and they are between our forecast horizons for 3 months and the end of the year,” warns Goldman Sachs. The bank notes, however, that index volatility increases before elections during election years, but after elections it usually decreases and the S&P 500 rebounds to an even higher level.
Also at 5,600 points at the end of the year see the S&P 500 Citi, which for mid-2025 leaves a target of 5,700 and 5,800 points for the closing. Citi’s outlook offers both a bull case, projecting the S&P 500 could reach 6,400 in 2025, and a bear case, projecting a drop to 4,700.
“Valuations may be maintained through the end of the year, but are expected to compress during 2025,” Citi warns, emphasizing the significant impact of mega-cap growth stocks on the index’s performance. “The cohort-weighting effect of mega-cap growth stocks is exerting a huge influence on the price action of the index.”
Meanwhile, Evercore ISI has raised its year-end target for the benchmark index to 6,000 (from 4,750), expecting earnings to grow 8% this year thanks to the strong potential of the AI “revolution.”
The firm has upgraded the information technology sector from ‘online’ to ‘overweight’ and highlighted that the sector benefits from structural demographic trends and the persistence of the AI frenzy.
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