Macro

BMO Ups S&P 500 Forecast to 5,600, Cites Strong Momentum

BMO raises S&P 500 target to 5,600, citing strong market momentum and historical patterns for continued gains.

By Bill Bullington

5/15, 12:14 EDT
S&P 500
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Key Takeaway

  • BMO Capital Markets raises S&P 500 target to 5,600 for end of 2024, citing underestimation of market momentum and strong corporate earnings.
  • Despite previous concerns of a too-fast rally, alignment between investor expectations and Federal Reserve policy boosts confidence in continued market gains.
  • Current average year-end S&P 500 target among Wall Street analysts is around 5,087, with BMO's forecast notably higher at 7% above recent closing levels.

S&P 500 Surges to Record Highs

The S&P 500 Index has shattered previous records, reaching new all-time highs and prompting a significant upward revision in year-end targets by BMO Capital Markets. The firm now sets its sights on a target of 5,600 for the index, marking an almost 10% increase from its previous forecast and standing as the most bullish prediction among Wall Street analysts. This new target is approximately 6.7% above the index's recent closing, reflecting a strong market performance rebounding from its October 2023 low. Brian Belski, BMO's chief investment strategist, acknowledged underestimating the market's momentum, which has been a key driver behind the upward revision. "It has become clear to us that we underestimated the strength of the market momentum," Belski stated, highlighting the alignment of investor expectations and Federal Reserve policy as additional positive factors.

Market Momentum Underestimated

Despite maintaining its market-wide earnings target at $250, BMO Capital Markets attributes the revised S&P 500 target primarily to an underestimation of market momentum, rather than changes in fundamental earnings expectations. This scenario mirrors the market rallies observed in 2021 and 2023, where the strength of market momentum was similarly underestimated. Belski emphasizes the importance of recognizing historical performance patterns, which suggest that the year-to-date (YTD) performance level could lead to continued gains in the market. "We believe the market is behaving in a similar fashion to 2021 and 2023 — years where we did not give enough credit to the strength of market momentum," Belski remarked, indicating a strategic shift to avoid past oversights.

Historical Patterns and Future Expectations

The S&P 500's intraday all-time high, trading near 5,279, underscores the market's robust performance and the potential for further gains. Belski's analysis points to historical performance patterns as a basis for continued optimism, suggesting that the market's momentum could sustain its upward trajectory. Despite the anticipation of a more significant pullback, Belski now believes any downturn will occur from a much higher level than previously anticipated, setting the stage for a rebound from a higher base. This perspective is crucial for investors looking to gauge the timing and potential magnitude of future market movements.

Street Views

  • Brian Belski, BMO Capital Markets (Bullish on the S&P 500):

    "It has become clear to us that we underestimated the strength of the market momentum... We believe the market is behaving in a similar fashion to 2021 and 2023 — years where we did not give enough credit to the strength of market momentum, something we are trying to avoid this time around."