S&P 500 is more overvalued than US credit or gold - survey

The S&P 500 is more overvalued than US credit or gold, according to the latest survey conducted among Bloomberg News readers. As much as 52% of respondents said they believe the S&P 500 is overpriced compared to these two assets.

Moreover, 49% of respondents said they see the next S&P 500 10% correction to start sometimes in 2024. Similarly, 55% said they expect to keep the same S&P 500 exposure over the next month.

On the median basis, the S&P 500 is seen closing the year at 5606, while the U.S. 10-year yield is expected to be at 4%.

31% said the key factor behind the expected correction is negative surprise on the AI front, followed by an increase in unemployment (27%) and pickup in inflation (24%), which would force the Federal Reserve to keep rates higher for longer.

On the other hand, the surveyed investors picked value stocks as the biggest bargain in the US stock market, followed by small stocks and the equal-weight S&P 500.

Finally, the S&P 500 rally broadening and shortening U.S. dollar are seen as trades that are most likely to prove wrong by the end of the year. 

Wall Street hikes S&P 500 targets

Wall Street has been aligning its forecasts for the S&P 500 recently, with Citi revising its year-end 2024 target up to 5,600. The forecast, extending into 2025, anticipates a mid-year target of 5,700 and a year-end target of 5,800.

Citi's strategy team, recognizing the influence of mega-cap growth stocks and various market risks, has also set a full-year earnings estimate at $250 and initiated a $270 estimate for 2025.

Goldman Sachs has similarly increased its S&P 500 price target to 5,600, attributing the rise to robust earnings growth from key tech companies, including Nvidia (NASDAQ:NVDA), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META), which together account for a quarter of the index's market capitalization.

The broker also acknowledged the role of AI advancements and investor optimism in this upward revision.

Evercore ISI analysts have raised their year-end S&P 500 target to a Street-high 6,000, citing the transformative potential of AI technology. The firm's outlook is based on an economic environment characterized by slowing inflation, the possibility of Federal Reserve rate cuts, and steady growth. 

All three financial institutions—Citi Group, Goldman Sachs, and Evercore ISI—have expressed caution regarding potential market downturns and the upcoming U.S. elections in November, which could introduce volatility to the S&P 500.