US stocks fall as retailer profits disappoint, Nvidia results deliver

Bank of America predicts S&P will close 2024 at 5,000

The good news is that investors have already discussed possible bad news.

That’s the message from Bank of America Global Research’s equity strategy team led by Savita Subramanian, who sees the S&P 500 (^GSPC) hitting a new record high in 2024, in a year that will be a “picker’s paradise.” titles”.

The company projects that the S&P 500 will close 2024 at 5,000, up about 10% from its current price, as markets have already passed “maximum macroeconomic uncertainty.”

“We are optimistic, not because we expect the Fed to cut rates, but because of what they have accomplished,” Subramanian explained. “Businesses have adapted…to higher rates and inflation.”

Bank of America expects earnings to grow 6% in 2024 to $235 per share. Subramanian’s team previously told Yahoo Finance that they not only believe the earnings recession is over, but that companies are poised to excel even in an economic downturn.

“Companies reduced costs and adapted to a weaker demand environment, and saw their profits increase again in the third quarter (+3% YoY),” Subramanian wrote. “History suggests that profits generally recover faster than they decline, as downturns typically eliminate excess capacity, resulting in a leaner cost structure and improved margin profiles.”

Still, Subramanian’s team writes that the best path forward for stocks is for profits to rise with positive GDP, consistent with BofA economists’ call for no recession in 2024.

Bank of America’s call for stocks to rise as the economy avoids recession is consistent with what Goldman Sachs detailed in its own 2024 outlook. Both research teams have made it clear that the worst-case scenario for actions would be that the Fed’s cycle of interest rate cuts begins as the economy heads into recession.

“Bulls should hope for an improving economy, leading to an easing of the credit cycle, rather than a dovish Fed driven by a weaker economy,” Subramanian wrote.