The S&P 500 will jump to a new record high of 5,000 next year, RBC says, joining bullish outlooks on 2024

Traders work on the floor of the New York Stock Exchange (NYSE) on October 20, 2023 in New York City.

Merchants work on the ground of the New York Inventory Trade (NYSE) on October 20, 2023 in New York Metropolis.Spencer Platt/Getty Photographs

  • S&P 500 will finish subsequent yr at 5,000, RBC Capital Markets stated, becoming a member of bullish 2024 views.

  • Robust investor sentiment and buoyant fairness valuations will carry the index to a contemporary report excessive.

  • Whereas Treasury yields are nonetheless excessive, they do not threaten the enchantment of equities, analysts stated.

Becoming a member of the bullish bets on the inventory market subsequent yr is RBC Capital Markets, which expects the S&P 500 to hit a report excessive subsequent yr.

In a word printed Wednesday, RBC analysts forecasted the benchmark index to finish 2024 on the 5,000 mark, a ten% achieve from Tuesday’s shut.

“Whereas the November rally (which has seen the S&P 500 rise greater than 10% since its October twenty seventh low) has seemingly pulled ahead a few of 2024’s positive aspects, we stay constructive on the S&P 500 within the yr forward,” analysts wrote.

RBC’s forecast places it alongside different Wall Road bulls who see huge positive aspects within the S&P 500 subsequent yr. On Tuesday, Financial institution of America additionally predict the index will hit 5,000, echoing the identical year-end goal that Phil Orlando, chief fairness strategist at Federated Hermes, had set as effectively.

For its half, RBC’s outlook is derived from 5 fashions, that are primarily based on sentiment, valuation and earnings, the financial system, politics, and the dynamic between shares and bonds.

Of their Wednesday word, analysts referred to as sentiment “the perfect star within the sky to navigate the US fairness market in 2023.”

RBC additionally famous that fairness valuations can keep increased than many traders presently understand.

“Implicit in [our valuation] mannequin is the concept that continued moderation in inflation can do a lot of the heavy lifting to prop up the P/E a number of, one thing our evaluation suggests occurred again within the 1970’s,” they wrote. “This mannequin has been probably the most constructive one in our arsenal on the 2023 forecast, and should very effectively find yourself being probably the most correct if Santa exhibits up in December as an alternative of the Grinch.”

In the meantime, bond yields have fallen since late October, however they’re nonetheless increased than earlier this yr. Nonetheless, these increased returns within the bond market — which can make equities much less engaging — aren’t a priority for shares, RBC analysts stated.

“If we have a look at 12 month ahead returns on the S&P 500 when the earnings yield hole has been at comparable ranges prior to now, the inventory market has nonetheless tended to rise solidly,” they wrote.

If there’s any uncertainty threatening the momentum carrying shares subsequent yr, it is the US presidential election.

On common, in a presidential election yr, the S&P 500 rises by round 7.5%, analysts stated. That is under the standard development within the index.

“What this stat tells us is that any given Presidential election yr is a supply of uncertainty for the US fairness market,” they famous. “Given the entire uncommon facets of the 2024 contest, that looks like an applicable means to consider the political backdrop for shares in 2024.”

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