Deutsche Bank has raised its year-end S&P 500 forecast to 5,500, the highest estimate among major Wall Street brokerages, citing strong corporate earnings as a key driver for supporting high equity valuations.
Previously, Deutsche Bank projected the index to close 2024 at 5,100 points. The revised target, now at the upper end of the investment bank's 5,100-5,500 range, represents an approximate 4% increase from the S&P 500's recent close of 5,303.27.
Oppenheimer Asset Management had also forecasted the index to end at 5,500.
Deutsche Bank strategists led by Binky Chadha said in a note on Friday:
"We see the earnings cycle having plenty of legs. While all the growth may not materialize this year, we see market confidence in a continued recovery rising by year-end, supporting equity multiples."
The S&P 500 index closed up 0.09% at the 5,308 mark on Monday, May 20. The index is up 11.3% year-to-date.
Meanwhile, Morgan Stanley's Michael Wilson on Monday also updated the bank’s S&P 500 forecast, projecting that it would reach 5,400 by June 2025 — compared to an earlier forecast of 4,500 through December this year.
Wilson also expects better earnings growth in the next two years, reflecting "healthy, mid-single-digit top-line growth in addition to margin expansion in both years as positive operating leverage resumes (particularly in 2025)", as per a comment cited by Reuters.
Deutsche Bank strategists have increased their earnings per share (EPS) forecast for S&P 500 companies to $258 from $250. Should economic growth remain robust, they anticipate that EPS could rise to $271 in 2024.
The S&P 500 index hit record highs last week due to a lower-than-expected rise the U.S. CPI, while the Dow Jones closed above 40,000 for the first time on Friday.
In February, Deutsche Bank revised its U.S. economic outlook, saying it no longer anticipates a recession this year.
Aside from Deutsche Bank, multiple major Wall Street brokerages have raised their year-end targets for the S&P 500 index, spurred by expectations of a "soft landing" for the economy and growing odds the Federal Reserve will cut interest rates this year.
As per data cited by Reuters, Goldman Sachs and UBS Global Wealth Management maintain year-end S&P 500 forecasts of 5,200.
Barclays sees the SPX hitting 5,300 by year-end, while BofA Global Research, HSBC, Morgan Stanley, and UBS Global Research have updated their projections to 5,400.
Citigroup appears to have one of the lowest S&P 500 forecasts on Wall Street, as it sees the index end the year at 5,100.
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