S&P 500 Zooms to 5,400 says Morgan Stanley.
Celebration time?
Is the month of May 2024 really the start of the Bull run engine?
From the desk of $Morgan Stanley(MS)$, Chief Investment Officer, Mike Wilson - it certainly looks so.
In his Sun, 19 May 2024 notes to clients (high net worth I supposed):
He is done (for now at least!) calling for US stocks to fall off a cliff.
After having one of the lowest $S&P 500(.SPX)$ year-end targets for the past year, he officially changed his tune.
Mr Wilson sees the S&P 500 hitting 5,400 level in the next 12 months, up from his previous forecast that the index would fall to 4,500.
His newfound target reflects about +2% upside in the index over the next 12 months, despite valuations falling and earnings continuing to rise.
More Details.
Mike Wilson thinks company earnings will grow at a healthy rate (around 8% in 2024 and 13% in 2025) because businesses will be more profitable (margins will expand).
This will likely lead to a small decrease in stock valuations (from about -20x earnings to -19x earnings).
This adjustment is normal as US & companies are in a later stage of the economic cycle (similar to what happened in the past, mid-1990s, mid-2000s, and 2018 most recently).
S&P 500 Upwards Revision.
It is comforting to know that Mike Wilson is not the only investment strategist who has unilaterally revised his forecast.
In fact, he was the 3rd macro strategist to boost his S&P 500 target in the last week.
On 15 May 2024, BMO, Chief Investment strategist, Brian Belski was the 1st to boost his year-end target to a street-high 5,600.
He argues that momentum in the recent rally will continue throughout the rest of 2024.
On 16 May 2024, $Deutsche Bank AG(DB)$, Chief Equity strategist, Binky Chadha was the 2nd to boost his year-end target for S&P 500, from 5,100 to 5,500.
His justifications - (a) robust earnings growth and (b) an improving macroeconomic outlook as reasons stocks could keep moving higher.
What Else Mike said:
The future of the stock market is unclear.
Economic data keeps changing, making it difficult to predict.
Due to uncertainty, Wilson suggests 3 possible scenarios:
Best case (bull case): The stock market goes up significantly (to 6,350 level) due to stronger company earnings than expected.
Normal case (base case): The stock market continues its current path.
Worst case (bear case): The US economy enters a recession, causing the stock market to drop (to 4,200).
Regardless of scenario, Wilson advises investors to be prepared for frequent changes in the market.
To manage this uncertainty, Mike Wilson recommends a barbell approach with a mix of stocks:
Quality growth stocks: These are likely to do well if the economy keeps surprising on the upside.
Cyclical stocks: These are tied to the ups and downs of the economy.
Defensive stocks (like utilities): These are less volatile and can provide stability during economic downturns.
Wilson highlights:
$Industrial Select Sector SPDR Fund(XLI)$ - because their earnings are improving.
$Utilities Select Sector SPDR Fund(XLU)$ - because they are a safe bet and might benefit from new technology.
My viewpoints: (mine only)
Really hope the veterans are spot-on in their observations and assessment of the Composite Indexes.
So that hopefully I could offload all the dead weight stocks purchased under “Cathie Wood” influence.
Mr Wilson’s two ETFs recommendations is the same as what I have posted on 12 May 2024 (click here ! to read).
Although, Mike Wilson is cautious about the future, he did offer strategies to navigate the uncertainty in the stock market.
I think $NVIDIA Corp(NVDA)$ will be the catalyst to lift US market sentiments when its Quarterly earnings results are out on Wed, 22 May 2024. Watch for it !
If S&P 500 is going to zoom to 5,400 - might as well aim for 6,350 instead ! Even if it falls short, it is still higher than 5,400.
Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks.
Do you think the veteran funds managers are right about S&P 500’s 5,400 level ?
Do you think rally will start now or from September 2024 onwards ?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
More bulls coming from AI wave
Pls help to "Re-post". Tks! Rating is important (to me).
Would you consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!