Just a few weeks into 2024, Wall Street banks are already increasing their year-end S&P 500 forecasts despite a low start. Strategists at UBS now expect the index to reach 300 points higher than their original forecast.
There was already a hefty dose of optimism heading into 2024. That’s because of the expectation the Federal Reserve will begin cutting interest rates. A recent stock market slump may have had the capital markets wondering if rate cut expectations were already prices into the 2023 rally. But UBS is even more optimistic about the year-end prospects for the S&P 500.
“A team of strategists at UBS led by Jonathan Golub now expect the S&P 500 to finish the year at 5,150 from a prior 4,850,” reported MarketWatch. “Their outlook from last year had warned that odds were in favor of a better turnout for stocks, with robust earnings, easing inflation and monetary policy and an improved economic backdrop all likely.”
More Confidence in Markets Likely
The risk of a recession that was brewing last year is also slowly dissipating. That should instill more confidence in the markets moving forward. That’s because UBS expects corporate earnings to prosper.
“Given the Fed’s recent pivot, subsequent decline in rate expectations, and above-trend 2024 [earnings per share]revisions, we now embrace this upside scenario as our base case,” said UBS strategist Jonathan Golub.
The increased optimism has come as a surprise to some strategists. That’s because the index has stumbled to start the year.
“Strategists are just as likely to be swept up in the enthusiasm as anyone else, and since few want to be laggards, the targets get raised along with the level of the market,” said Steve Sosnick, chief strategist at Interactive Brokers. “That said, I don’t recall them being revised higher this quickly after the start of the year – especially in the absence of a new S&P 500 high.”
2 S&P Directions from Direxion
The release of economic data should continue to move the markets as such. Given this, any sliver of news that indicates rate cuts may take longer than anticipated could cause the S&P 500 to dip. If that’s so, traders will want to consider the Direxion Daily S&P 500 Bear 3X ETF (SPXS). It seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
If the long-term view of UBS holds and the index starts to exhibit signs of upside, traders can buy the dip and use the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). Both SPXS and SPXL offer thrice the leverage. So only seasoned traders should use these products.
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