(Bloomberg) -- Wall Street strategists are rushing to ratchet up their US stock-market forecasts as equities stage the strongest rally in nearly three decades, blowing past previous targets to hit fresh record highs.
Closely followed analysts at BMO Capital Markets, Goldman Sachs Group Inc. and UBS Group AG over the past month have marked up their year-end projections for the S&P 500 Index, expecting the benchmark to extend a gain that’s already pushed it up 22% in 2024.
The moves reflect how much the rally has surpassed expectations this year as the economy and corporate profits proved surprisingly resilient and investors continued to pour into technology stocks expected to gain from artificial-intelligence breakthroughs. The S&P 500 hasn’t risen so much by this point of the year since 1997, when the dot-com bubble was building.
The scale of the advance is prodding Wall Street prognosticators into a scramble to lift their outlooks into the final stretch of 2024 — a so-called “strategist short squeeze,” similar to when a rapid rise in share prices forces traders to cover bearish bets. It’s reminiscent of last year, when the S&P 500’s 24% jump also caught them off guard.
With the S&P 500 holding over 5,800, UBS’s Jonathan Golub and Patrick Palfrey on Tuesday were the latest to raise their year-end call for the gauge. They boosted it to 5,850 from 5,600, while lifting their 2025 forecast to 6,400 from 6,000. Although their 2024 estimate implies no further gains, they see the benchmark climbing another 9% over the next 15 months. The upgrade marks the fourth by the UBS strategists since they published their annual outlook late last year.
Earlier this month, Goldman Sachs chief equity strategist David Kostin bumped up his S&P call to 6,000 by December. It was also his fourth increase since the final months of 2023 and made his the second highest among prognosticators tracked by Bloomberg. BMO’s Brian Belski has the most bullish figure on the docket after in September stating the gauge can soar to 6,100 before the year is out.
“We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” Belski told clients as he upgraded his projection.
The optimism comes even as traders face bubbling market risks: a tight US presidential election next month, war in the Middle East, and uncertainty around the trajectory of Federal Reserve policy easing after hotter-than-expected job-market and inflation data last month. The S&P 500 fell slightly on Tuesday after logging its 46th closing record in the last trading session.
“Fiscal and monetary policy uncertainty, and potential election outcomes, make 2025 returns far from certain,” Golub wrote on Tuesday. That didn’t prevent him from betting that the stock market can keep powering on, noting that risks are skewed to the upside, with moderating inflation, Fed cuts, improvement in low-end consumer and business activity and broad-based profit strength.
The confidence that equities can defy looming uncertainties comes from learned experience. Over and over again, many strategists have underestimated how much stocks would gain.
In January, the average year-end S&P 500 projection was 4,867 — before a bevy of boosts to estimates — about 17% below where the index was trading on Tuesday. At the start of 2023, it was 4,050, a 15% miss to the downside from the S&P 500’s level at the end of the year.
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