Oppenheimer strategists have revised their year-end target for the S&P 500 to $5,900, up from the previous $5,500, along with an upgraded earnings projection for the index. This marks the firm’s third price target adjustment for 2024, initially set at 5,200 on December 11.
The latest bullish outlook is backed by strong S&P 500 earnings over the last three quarters, coupled with economic data showcasing resilience, driven by the Federal Reserve’s cautious monetary policy, according to Oppenheimer.
“An innovation cycle that could benefit all 11 sectors of the S&P 500, showing signs of being both cyclical and secular, combined with cross-generational demographic needs suggesting a shift in mindset regarding equities, adds further support to the case for equities at this time,” Oppenheimer strategists said.
On March 25, after the S&P 500 surpassed the initial 5,200 target, the strategists hinted at a potential upward revision if their economic and market outlook proved too conservative.
With the S&P 500 recently closing at a record high of 5567.19, the new target of 5,900 implies a potential gain of just under 6% from the current level, according to Oppenheimer. This forecast takes into account typical uncertainties related to economic data, earnings results, and domestic and geopolitical risks.
When Oppenheimer first set the target last December, it projected a 13% upside for the S&P 500 by year-end, based on expectations of the Federal Reserve maintaining a cautious approach.
The investment bank anticipated the Fed would continue its pause on rate hikes, initiated in June 2023, and, despite some economic slowing, saw a lower likelihood of recession due to persistent economic resilience and the Fed’s sensitivity to higher-than-expected inflation, making the 2% inflation target elusive.
At the end of last year, Oppenheimer expected one or two rate cuts from the Fed, one less than the three forecasted by the Fed in December, and significantly fewer than the cuts priced in by the Fed Fund Futures at that time.
“Now, just days past the mid-year point of 2024, we expect the Fed to cut once or twice late in the fourth quarter as a ‘good faith down payment’ for Main Street and Wall Street, signaling that the central bank is getting closer to the end of the current rate hike cycle, if not quite there yet,” Oppenheimer strategists continued.
“We would be surprised if the Fed were to cut interest rates as early as September, as some market participants are expecting based on the futures tracking Fed funds rate expectations,” they said, adding that Powell and his colleagues likely want to keep Fed policy independent of politics.
Alongside the year-end price target hike, Oppenheimer also raised its 2024 earnings projection for the S&P 500 to $255, up from $250.
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