The S&P 500 (^GSPC) closed at a record high on Friday, climbing above 5,400 three days in a row. Evercore ISI has raised its year-end target to 6,000, while Goldman Sachs has raised it to 5,600.
Yahoo Finance’s Josh Schafer breaks down the bullish calls on the S&P 500 and how the tech sector is driving the market.
Read more about the markets’ record highs here.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Melanie Riehl
Video Transcript
Get right to our top story this morning.
The S and P 500 coming off another record setting close, rising 1.5% last week closing above 5403 days in a row.
Now, Wall Street getting more optimistic about where stocks are heading from here.
Evercore, I si and Goldman Sachs both raising the year end forecast for the S and P 500.
Josh Schafer joining us.
Now with the latest Josh, I was just gonna say you can see the new targets right there on the screen.
But really, we have certainly started to see or continue to see this optimism.
Really sweep Wall Street.
Yeah.
So we have Evercore moving from 4750 to 6000.
So Julian Emanuel completely flipped right.
He had been a little bit in the bear case there and now he’s the most bullish strategist that we track Goldman coming up from 52 to 56.
And really, you started to feel this after the inflation data last week, not everyone necessarily was moving their year end price target.
But Emanuel himself highlighted that inflation had been a key part of the bull case for stocks.
And if we see inflation coming lower, which we saw in last week’s CP I and PP I data that would be good for stocks.
Here’s the char he highlighted here.
You can see CP I and purple.
The S and P 500 isn’t blue.
You’ll sort of note as you look at the little lines there.
When you see a big tick down in purple, usually the next kick higher comes in white blue, right?
So it’s been a little bit of a weeding indicator for where the market’s headed.
I think that’s rather intuitive given the fed rate cut cycle we’re in right now.
If inflation is coming down, that is largely good for not just the stock market but probably all of us in general.
And the other key thing that has been at work here has been earnings revisions have not been revised down by nearly as much as they normally are.
So that’s something Goldman Sachs was highlighting and the key driver there is largely big tech.
You can see it right there.
You’re looking at five names that have seen about 38% growth in their, in their earnings estimates.
And that’s sort of carrying the S and P 500 to not have earnings estimates fall down.
We know those estimates usually come lower.
And so the big takeaway from a lot of this research was sort of maybe we’re starting to accept that the A I trade can take us a little bit higher.
Like even if it’s just the five stocks, that could mean that the market could run higher.
Goldman said, if we have large cap exceptionalism, they see the S and P 500 closing above 6000.
So there’s sort of different cases here.
But if you have that large cap out performance, people are starting to realize that if that continues, that would be very good for the broad index, how much of this is reliant on what the fed does moving forward?
Or because it’s kind of like a scoop of CP I data with A I sprinkles.
Is it OK?
If the fed takes a little bit longer to start cutting, I think so ma there’s not a lot of people in these notes saying we believe the fed is going to cut two times this year and that is why the S and P 500 is going to hit 6000.
If you think the S and P 500 is gonna rally almost 10% or roughly 10% from where it is right now, you’re not that worried about the fed cutting.
What you’re focused on is inflation is coming down.
That means yields are gonna be lower moving forward and we’ve maybe seen the peak in the tenure.
That’s something that a lot of strategists are highlighting when you look at this inflation data is OK, maybe we’re at the peak of rates and that’s sort of the key part of it.
And then the other chart I wanted to bring up because I thought this was really interesting when we talk about bubbles and sort of the, the concept of this A I trade going longer.
Julian Emanuel highlighted how long the S and P 500 in the past has traded above a 20 pe.
So, right now everyone call stocks expensive.
Right.
Well, when stocks were expensive in the 19 of the late 19 nineties bubble, they traded at that level for over 700 days when they were expensive in the recent 2021 euphoria, they traded at that level for over 600 days.
Right now, it’s only been 140 days.
And so this is to sort of get to the point that a lot of people have highlighted as we’ve had.
This stocks are expensive conversation for a couple of months.
Now, stocks can be expensive for a while and that should not be a reason that investors don’t want to get into the market or want to get out of the market.
This is not to say that history is a definite indicator and we’re gonna get the 600 days of the S and P 500 trading above a 420 pe.
But I did think that’s a fruitful reminder that just because things are expensive doesn’t mean that we’re gonna just fall off a cliff.
We can trade at these levels for a while and that’s why everyone’s talking about those earnings estimates.
Right.
It really depends on if we deliver.
If those companies deliver the earnings, then maybe we can just afford a high value for a lot longer than people thought.
That’s such an important chart showing that we’re basically like 20% of the way in to the longest running previous time period.
There’s a lot, there’s a lot of charts that show us that we are just not at the 19 nineties.com bubble euphoria.
If that’s where you think we’re headed, there’s, there’s more to come in that aspect.
