Oppenheimer lifts S&P 500 target to 5500 on 'remarkable resilience' of US economy

Oppenheimer strategists have revised their year-end target price for the S&P 500 upwards from 5,200 to 5,500, implying more than 5% upside from Friday’s closing price. The move comes alongside an increase in their earnings projection to $250 from $240 for 2024, based on a new price-to-earnings (P/E) multiple of 22x, up from the previous 21.7x.

Oppenheimer boosts S&P 500 target

In a Monday note to clients, strategists said that the recent S&P 500 earnings results, combined with persistent signs of “remarkable resilience” of the US economy, the Federal Reserve's sensitive approach to monetary policy, and the evolving investment landscape driven by innovation and demographic shifts, have prompted them to adjust their target upwards.

This reassessment is not merely influenced by traditional market drivers such as fear and greed but by a broader recognition of the necessity to invest with an eye toward intermediate and long-term objectives, strategists explained.

Moreover, the resilience of the US economy, despite the Federal Reserve's aggressive monetary tightening cycle—which included 11 rate hikes and 6 pauses without precipitating a recession—has taken many by surprise.

This monetary policy path lifted the Fed Funds rate from 0.0–0.25% to a range of 5.25–5.50% over the past two years, without tipping the economy into a recession.

“All of the above prompts us to increase our year-end price target acknowledging the possibility that we might need to raise the target price again later this year should this economic and market outlook prove us too conservative in our projections,” strategists said in the note.

S&P 500 outlook for 2024

After hitting more than a dozen consecutive all-time highs in the recent period, Wall Street’s projections for the S&P 500’s prospects in 2024 are now more divided than earlier.

Earlier today, Goldman Sachs strategists highlighted several potential scenarios outlining where the benchmark index could end the year.

In their baseline forecast, the investment banking giant sees the S&P 500 wrapping up 2024 nearly unchanged at 5,200, roughly 1% down from current levels.

Other possibilities include a “catch-up” case in which the index would end the year at 5,800 and a “catch down” scenario with a year-end price of 4,500. A scenario marked by recession fears would also push the S&P 500 down to 4,500, Goldman’s team wrote.

In their most bullish projections, Goldman says the index could surge to as high as 6,000 by the end of 2024, in case of “continued mega-cap exceptionalism.”

“We previously argued that the current growth stock rally is different from the 2021 and Tech Bubble experiences because investors today focus on profitability. In addition, although AI optimism appears high, long-term growth expectations and valuations for the largest TMT stocks are still far from “bubble” territory,” analysts wrote.

In the meantime, JPMorgan strategists took a more cautionary stance in terms of the S&P 500 outlook, saying the index’s gains this year have been fueled mainly by expanding price-to-earnings (P/E) multiples rather than by earnings growth.

Should global central banks adopt a more dovish position and earnings growth does not slow down, the current high equity multiples “could be defended,” said JPMorgan’s team.

“However, if activity momentum, and in particular earnings delivery, disappoints, and central banks end up more reactive than proactive, then we think that equity multiples would need to fall,” they added.