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BMO’s Brian Belski raised his S&P 500 price target to $6,100, indicating a 7% upside by year-end.
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Fed rate cuts and favorable seasonal data support the bullish stance.
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Belski cites extended market gains and a likely soft landing for the U.S. economy as key factors to watch.
BMO’s Brian Belski has taken over as Wall Street’s most bullish equity strategist.
In a note Thursday, Belski raised his 2024 S&P 500 price target to $6,100, representing a potential upside of 7% over the next three months.
Belski’s previous price target for the S&P 500 in 2024 was $5,600.
A combination of factors, including the Federal Reserve’s 50-basis-point interest rate cut on Wednesday, was enough to make Belski even more bullish on stocks.
“As with our last target increase in May, we continue to be surprised by the strength of market-wide earnings and decided once again that more than an incremental adjustment was necessary,” Belski said.
Belski said the seasonally favorable data suggests the stock market will finish the year strong in the fourth quarter, “especially since the Fed has shifted into easing mode.”
Since 1950, there have been eight years when the S&P 500 rose between 15% and 20% in the first nine months of the year.
According to Belski, in those years, the S&P 500 posted an average fourth-quarter return of about 6%, which is about 50% higher than the average fourth-quarter return for all years.
Belski also finds it encouraging that recent stock market gains have not been concentrated only in large-cap technology stocks.
The stock market rally, however, has spread to other sectors and smaller companies.
“This is a trend we expect to continue and should help support future market gains even if Mag-X’s share price and fundamental performance continue to slow in the coming months,” Belski explained.
Finally, with the likelihood of a soft landing for the U.S. economy increasing, Belski said elevated valuations are justified.
Based on Belski’s 6,100 share price target, that implies a price-to-earnings ratio of 24.4x, which is above historical averages.
“We continue to believe that a soft landing is the most likely economic scenario, making the current environment more comparable to that of the mid-1990s, a period when the index was able to maintain a multiple above 20x for several years,” Belski said.
Read the original article on Business Insider