S&P 500 reaches 46th record close

The S&P 500 has seen big gains this year. It reached its 46th record close since January. Strong earnings, economic growth, and hopes for more rate cuts have pushed the market up.

Difference between stock and bond sentiment is near a multi-decade high … over past 25 years, there haven’t been many times when Intermediate-term Optimism Index for stocks was more than 50% higher than Bond Optimism Index per ⁦@sentimentrader⁩ pic.twitter.com/VMhVZHEAxa

— Liz Ann Sonders (@LizAnnSonders) October 17, 2024

Analysts think S&P 500 earnings rose 4.1% in the third quarter. That’s down from 11.3% in the second quarter, but still strong. The economy grew at a 3% rate in the second quarter.

GOLDMAN: “.. I think that the S&P 500 is well north of 6K by the end of the year. .. The median S&P 500 return from October 15th to December 31st in election years is +7.04% since 1928.

“.. this implies a year-end level of $6270.” [Rubner] $SPX 🇺🇸 pic.twitter.com/TLfG8nYbgE

— Carl Quintanilla (@carlquintanilla) October 17, 2024

The Atlanta Fed expects 3.2% growth in the third quarter. The September jobs report was positive, with 254,000 jobs added. David Kostin from Goldman Sachs raised his year-end S&P 500 target to 6,000 points.

B of A: We forecast “blowout Retail Sales this week .. which would strengthen the ‘no landing’ narrative .. bullish for stocks ..
 
“.. Here’s 2024 price action on the day of Retail Sales prints:” 🇺🇸 pic.twitter.com/YvNvWVcccM

— Carl Quintanilla (@carlquintanilla) October 15, 2024

He cited good economic conditions for profit growth. Inflation rose 2.4% in the 12 months through September. That’s slightly above forecasts but down from August. The Fed’s inflation gauge was close to its 2% target in August.

S&P 500 milestone and job growth

Last month, the Fed cut rates by 0.5 percentage points. Many expect more rate cuts. But not everyone is optimistic. The S&P 500 trades at 21.4 times next year’s earnings estimates. That’s well above historical averages. Barry Bannister from Stifel thinks the market is very overvalued. He says the S&P 500’s nearly 40% jump this year is an overshoot. Bannister sees the S&P 500 possibly falling 26% in 2025 to where it started 2024. He points to historical valuations and market cycles. The S&P 500 began 2024 at 4,609. He also noted that growth stocks are outperforming value stocks by a wide margin. This is similar to 1939 and may signal the end of growth’s dominance. Bannister said populism is influencing the economy and markets. This drives recovery and favors value stocks.