The S&P 500 is having an incredible year. The benchmark U.S. stock market index is up 19.7% on the year as bulls test the resistance around 4600.
For Stifel’s analysts, known for accurately predicting the rally in the first half of 2023, this rally has largely played out.
The analysts upgraded their mid-2024 price target for the S&P 500 to 4650 from 4400 previously.
“We see the S&P 500 topping around 4,650 into mid-2024 as mega-cap Growth loses some ground to Cyclical Value (Banks, Capital Goods, Energy, Financial Services, Insurance, Materials, Real Estate and Transportation), as a result of economic growth, inflation and Federal Reserve tightness all proving resilient,” the analysts said in a note.
The strategists expect the Federal Reserve to start cutting rates not before the second half of the next year.
“The Fed holds the key to “double-dip” risk in 2H24,” they added.
They also forecast that inflation-adjusted returns on the S&P 500 will remain flat for the next decade.
“We expect a range-bound S&P 500 in real terms to continue into the early 2030s.”
“Such an environment of reflationary economic growth (we expect moderately reflationary growth in the 2020s) historically benefits Value, Small Cap and International equities, albeit with weaker overall S&P 500 index returns than the Growth-led 14.1% annualized real total return (after inflation, with dividends reinvested) experienced in the decade 2011-21, a high level of returns that we believe is gone for a generation.”
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