In a surprising reversal, Piper Sandler & Co.’s Michael Kantrowitz, known for his consistently downbeat predictions, has shifted his outlook on the S&P 500 Index, now projecting it to approach 5,000 by the end of 2024, contingent on the resilience of the labor market.
Kantrowitz, who maintained the gloomiest year-end forecast for the S&P 500 in 2023, now identifies as an optimist, envisioning the US equity benchmark reaching 4,950 as his base-case scenario. This marks a significant departure from his earlier bearish stance, which warned of a market plunge due to concerns over the Federal Reserve’s tightening measures.
The analyst anticipates a potential range in 2024, with the S&P 500 experiencing gains of up to 5% or losses of as much as 10%, unless there is a surge in weekly jobless claims from the current level around 200,000. He emphasizes that a substantial increase in claims, reaching 275,000, could lead to an adjustment in expectations.
Kantrowitz acknowledges that his revised outlook is more bullish than the average target of sell-side strategists tracked by Bloomberg, which stands at 4,851. This shift follows his admission to clients last month that the Fed’s dovish shift towards potential monetary easing in 2024 was a positive catalyst for US stocks.
Looking ahead, Kantrowitz expects the narrative of a soft landing and the Fed’s pivot to remain central for markets in 2024. He emphasizes the importance of the Fed’s actions in determining market direction, highlighting that the potential for a recession and labor market deterioration poses risks.
While suggesting an overweight position in quality stocks, especially those with high cash flows, and a preference for large caps, Kantrowitz advises caution regarding overstretched mega-cap shares.
Despite his extreme reversal, Kantrowitz is not alone in adjusting his stance. Wall Street strategists, including major firms like Goldman Sachs, Bank of America, and Deutsche Bank, have shifted to a more bullish outlook for stocks in 2024, forecasting the S&P 500 to reach or exceed 5,000.
As the market evaluates earnings reports from major banks and analyzes economic data, the S&P 500 remains steady, approaching its previous closing peak. While Kantrowitz’s 2023 miss and subsequent reversal are notable, they align with the broader trend of Wall Street analysts turning more optimistic after last year’s market surge.
