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03/25/2024 Market Strategy

  • John Stoltzfus
  • March 25, 2024

Want to Take You Higher

Resilient fundamentals, effective monetary policy and innovation suggest the need to adjust our year end S&P 500 price target higher

Key Takeaways

  • We are increasing our year-end target price for the S&P 500 to $5,500 (from $5,200) and raise our earnings projection to $250 from $240 for the S&P 500 in 2024.
  • Our upwardly adjusted price target and earnings projection assume a slightly higher P/E multiple of 22x up from 21.7x with our earlier target.
  • Last week’s economic data included an uptick in the Conference Board’s Leading Indicator—the first positive reading in this composite of ten leading data points after 23 consecutive declines.
  • This week brings the latest reading on the Fed’s preferred inflation gauge —the PCE deflator for February will be released on Friday. 
abstract financials

S&P 500 earnings results over the most recent two quarterly reporting seasons, economic data that persists in showing resilience, the Fed’s mandate-sensitive monetary policy, and prospects for innovation coupled with cross generational demographic needs that suggest a shift in mindset driven not so much by fear and greed but a need to invest for intermediate to longer-term goals suggest to us an opportunity to tweak our target higher (some 8% above our 5,200 target and just 5% from where the broad market closed last Friday).

Beyond the mix of quarterly results for the S&P 500 in the two most recent reporting seasons, there’s US economic data that still shows remarkable resilience notwithstanding a degree of slowing with a Fed rate hike cycle made up so far of 11 rate hikes and 6 pauses that calls out for attention. That the Fed has so far avoided pushing the US economy into a recession over the course of the past two years as it ratcheted the Fed Funds rate from a band of 0.0–0.25% to a band of 5.25–5.50% has surprised almost everyone.

All of the above prompts us to increase our year-end price target acknowledging the possibility that we might need to raise the target price again later this year should this economic and market outlook prove us too conservative in our projections.

Quotation from Aenean Pretium

For us the big surprise this year has not been so much the resilience of the economy but rather the substantial capitulation among the bears and bearish community…

When we initiated our year-end target price of 5200 last December it was among the highest targets projected by market participants and pundits. At the time we were even considered by some to be way too optimistic.

When we initiated our price target last December, we looked for around 13% upside for the S&P 500 this year on expectations that the Fed would maintain its sensitive approach in practicing its mandate. We factored into our thinking the effects of a continuation of the pause mode the Fed had already initiated last June and while expecting some further slowing of the economy we saw less likelihood of a recession as a result of the economic resilience that was so persistent and the sensitivity of the Fed in addressing stickier than expected inflation.

At the end of last year, we looked for one or two rate cuts this year by the Fed (one cut less than the three cuts that the Fed had forecast in December and three or four fewer than what the Fed Funds futures were pricing in at the time.

For us the big surprise this year has not been so much the resilience of the economy but rather the substantial capitulation among the bears and bearish community as well as improved broader investor sentiment (both institutional and private client) that appears to be supported by needs to invest for the future rather than chase the latest hot pick or actionable idea of the day.

We’re not saying that there’s not some fast players on the move in the day to day and week to week action or deny that some froth exists in some corners of the market but rather that the hot market stuff thus far looks to have been offset by a broadening of the current rally across sectors, styles, and market capitalizations providing offset to “irrational exuberance” (aka fear and greed).

Perhaps the positive offset is found in the need to meet the challenge faced in providing for a child’s education, or one's retirement in a world where defined benefit pension plans are hard to find and Social Security benefits seem less likely to play the role they once played in past decades. And perhaps the current market environment reflects not so much a desire to “play the market” but a need to invest for meeting a higher goal more dependent on fundamentals than short-term trends.

We remain positive on equities and continue to see fixed income securities as complimentary to stocks in providing portfolio diversification.

Some near-term profit-taking in the day-to-day action of the market, particularly in growth segments of the market that have had exceptional run-ups since last year into this year continues to appear to us quite normal. Such activity combined with a process of rebalancing and rotation into other segments of the stock market in our view can be healthy and contribute to the broadening of the markets’ progress from last year through this year.

Near-term volatility could in our view present opportunity for investors to “catch babies that get thrown out with the bath water” in periods of market down drafts as the market digests levels of uncertainty that are not uncommon to times of transition like these.

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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