The S&P 500 is up over 20% so far this year, but Brian Belski of BMO Capital Markets believes that the gains will continue in the months to come.
Belski told his clients on Thursday that the benchmark index could rise further and reach 6,100 before the end of the year, now that the US Federal Reserve announced its first rate reduction in four years.
Belski expects an above-average fourth quarter, after the central bank announced plans to reduce interest rates by 50 basis points more in 2024.
His forecast suggests that the S&P could gain another 9.0% from here.
Belski expects that the rally will continue
The S&P 500 fell to 5,400 in the first weeks of September, but has since recovered to 5,700 as I write.
Brian Belski raised his year-end goal to a new high of 5,600 in the month of May.
In a research note published today, he said: “We are still surprised by the strength and volume of gains on the market. We decided that we needed to make a more significant adjustment than merely a small one.”
The benchmark index may retest the low of September, but is in a good position to quickly rebound and reach the 6,100 level before the end of the year, according to the BMO strategist.
Brian Belski believes that the projected upside will materialize, even if large-cap technology shares trade sideways. He expects that the rally will broaden as it moves forward.
The US economy is not headed for a downturn
On Thursday, the BMO strategist kept his expectation for earnings per share at $250. This means he multiplied the target level of 6,100 by 24.4 to reach it.
He acknowledged that the presumed multiple of price to earnings may appear high, but said it was not when compared with the mid-1990s.
Belski compares the current situation to the mid-1990s, if the United States do not enter a recession within the next few months.
Many experts still predict a soft landing despite recent weakening in the jobs data. Tom Porcelli is the chief US economist for PGIM Fixed income. He commented on the Fed’s 50-bps rate reduction announced last night:
This was a big cut that was not typical. We are not at the door of recession. This easing, and this big reduction is about recalibrating the fact that inflation slowed down so much.
The Labor Department reported last week that inflation was 2.5% in August, compared to the Dow Jones estimate of 2.6%.
The core CPI, excluding food and energy, was up 0.3% in the month, which is more than the 0.2% expected.
This post BMO strategists predict S&P 500 to surge to 6,100 after Fed rate cuts could be modified as new developments unfold.
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