In a notable update, a team of strategists at UBS Global Research led by Jonathan Golub have revised their year-end stock outlook for the benchmark S&P 500 index. They now anticipate the index to end the year at 5,150 — up from their previous forecast of 4,850.
Last year, the team’s outlook had already signaled the likelihood of a favorable outcome for stocks, citing robust earnings, easing inflation, accommodative monetary policy, and an improved economic environment. In a note cited by MarketWatch reporter Barbara Kollmeyer, Golub and his UBS colleagues wrote:
“Given the Fed’s recent pivot, subsequent decline in rate expectations, and above-trend 2024 [earnings per share] revisions, we now embrace this upside scenario as our base case”.
Their S&P 500 forecast for 2024 is now higher than UBS’s wealth management arm, which recently upped their index target to 5,000.
This optimistic projection from UBS comes amid a challenging start for stocks, with concerns that investors, driven by overly optimistic expectations of Federal Reserve interest rate hikes, may have rushed into the market too hastily.
Despite the volatility, the S&P 500 was only 0.27% away from its record close in January 2022 as of last Friday.
The updated S&P 500 target by UBS amounts close to an 8% potential upside from the index’s current level — it closed about 0.1% higher on Friday at 4,783.83 points. Markets were closed in the U.S. on Monday for the MLK Day holiday.
UBS also raised their 2024-25 earnings per share estimate to $225 from $235 and $246 to $250, respectively.
“Importantly, our growth estimates of 6.3% and 6.4% over the next 2 years are below the consensus of 11.4% and 12.8%. While earnings should drive 2024 returns, falling interest rates should support incrementally higher multiples,” Golub and his associates said.
UBS's new S&P 500 target positions it among the higher forecasts on Wall Street for 2024. Yardeni Research leads with a 5,400 target, while JPMorgan has a more conservative estimate at 4,200. Goldman Sachs also raised its forecast to 5,100 from 4,700 in late December.
The end of 2023 saw several financial institutions sketch out projections for the coming year, with many adopting a more cautious outlook for the global economy than the one issued by UBS earlier today.
Opinions on the U.S. dollar’s potential trajectory were mixed, with a Reuters poll indicating that the USD may decline against G10 currencies in 2024. U.S. dollar forecasts from HSBC and Citibank’s Wealth Management division in Hong Kong indicated that they saw the USD remaining strong this year, while a projection from Societe Generale’s Kit Juckes noted the DXY index may decline to 97 (the DXY traded at 103.23 as of January 16).
A gold price forecast overview by Markets.com in late 2023 shed light on several investment banks’ outlooks for the commodity. Australia-based ANZ Bank and Japan’s MUFG appeared highly bullish on the yellow metal, forecasting it to potentially hit record highs in 2024 on the back of three key factors: interest rate reductions, geopolitical risks, and central bank buying.
Analysts at Germany-based technology firm Heraeus were more reserved, saying that gold could potentially trade within the $1,880 and $2,250 range, with interest rates playing a key factor.
Wall Street banks were also split in their U.S. interest forecasts for 2024, with UBS notably projecting an aggressive series of rate cuts by the Federal Reserve, which aligns with its base-case scenario for the S&P 500 this year.
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