S&P Hits New Peaks, Strategists Eye 5,600 Amid Earnings Optimism

S&P 500 reaches record highs, prompting major Wall Street strategists to raise year-end targets amid strong earnings growth.

By Bill Bullington

5/16, 09:40 EDT
S&P 500
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Key Takeaway

  • S&P 500 hits new highs, prompting analysts to raise year-end price targets, with BMO's Brian Belski setting a high of 5,600.
  • Average year-end S&P target among strategists is now 5,095, despite recent upward revisions and strong market momentum.
  • Earnings growth expectations for Q2 are at a record high of 10.6%, supporting higher stock valuations and market breadth expansion.

S&P 500 Hits Record Highs

The S&P 500 and most major stock market indexes have reached or are nearing historic highs, prompting a wave of earnings and year-end price target revisions. Sam Stovall from CFRA predicts a 5% to 10% advance in the coming months before a potential 5%+ decline. Brian Belski at BMO Capital has raised his year-end S&P target to 5,600 from 5,100, marking the highest estimate among major Wall Street strategists. This adjustment reflects a belief in the market's momentum, drawing parallels to the rallies seen in 2021 and 2023.

Wall Street Strategists Revise Targets

Several Wall Street strategists have revised their full-year price targets for the S&P 500 upwards. Notable revisions include Bank of America's target to 5,400 from 5,000 and Goldman Sachs to 5,200 from 5,100. Despite these adjustments, the average year-end price target among strategists remains at 5,095, with a median target of 5,200. This suggests that unless a significant economic downturn occurs, further upward revisions are likely.

Earnings Growth and Market Momentum

The market's rally is underpinned by more than just momentum; it's also driven by rising earnings and the prospect of lower interest rates. Q2 earnings estimates for the S&P 500 indicate a 10.6% growth from the previous year, with each quarter of 2024 expected to set a new record for S&P 500 profits. Valuations remain high but are considered reasonable given the economy's strength and the potential for AI-boosted returns. Additionally, market breadth has been remarkable, with more stocks advancing than declining across all cap sizes, signaling a sustainable intermediate-term uptrend.

Street Views

  • Sam Stovall, CFRA (Bullish on the S&P 500):

    "The S&P at new highs will 'open the door to a 5% to 10% advance over the coming three plus months before enduring another 5%+ decline.'"

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

    "We are comfortable with this because 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."