(Bloomberg) -- The S&P 500 Index can keep climbing into the final stretch of 2024, with a 5% gain from here not out of the question, as investors exhale after the US presidential election passes and year-end FOMO kicks in, according to Morgan Stanley’s Mike Wilson.
But with no clear catalysts in sight, that enthusiasm is likely to fade as the calendar turns to 2025, the strategist warns.
“I think we could see 6,000, potentially, in some sort of a clearing event, where there’s not a lot of consternation and people feel good about things,” Morgan’s chief US equity strategist said Monday in an interview with Bloomberg Television. That would imply a nearly 5% gain from where the US equity benchmark’s Friday close at around 5,728.
Wilson then added the gauge could rise to as high as 6,100, but that it would not top that level “in any scenario” this year due to stretched valuations and growth unlikely to accelerate in a way that multiples can expand further heading into 2025.
The S&P 500 just logged its first down month since April after a string of lackluster earnings reports from some of the so-called Magnificent Seven technology stocks that have driven the index’s rally. While traders remain on edge with the US presidential election on Tuesday and the Federal Reserve rates decision on Thursday, Wall Street forecasters are largely betting that the stock market can resume its advance once it clears those obstacles.
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“I could see a blow-off move if some kind post election,” Wilson said. “And then reality sets in, and we have to have some type of fiscal consolidation no matter who wins. And that’s going to create uncertainty again.”
The US presidential race between Vice President Kamala Harris and former President Donald Trump comes down to the wire on Tuesday, with polls showing the candidates in a dead heat both nationally and across the pivotal swing states that will decide the election.
“I do not agree with the view that a Republican sweep is the best outcome for equities,” Wilson said. “I think it’s probably Trump with a divided Congress. Markets like uncertainty. They don’t like one party in power.”
The strategist sees a Trump presidency as “probably more pro-growth.” If Trump wins, he said, cyclical stocks such as financials and industrials should outperform, while a Harris presidency would provide a little less growth and probably be better for bonds.
More than half of the living US recipients of the Nobel Prize for economics recently signed a letter calling Harris’s economic agenda “vastly superior” to Trump’s “counterproductive” plan.
Wilson was one of Wall Street’s most bearish voices on US stocks though much of the recent rally, but has softened his tune recently. He’s acknowledged that he’s strayed from making big calls on the S&P 500, given how difficult it has become to predict what the index will do against a backdrop of such economic uncertainty.
--With assistance from Jonathan Ferro, Lisa Abramowicz, Annmarie Hordern and Isabelle Lee.
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