Evercore ISI remains optimistic about the S&P 500, maintaining its base case for the index to reach 6,000 by the end of 2024.
In a note to clients Monday, the firm said that despite recent market volatility and fears of a recession, it believes the economy is still on track for a "soft landing," which would support continued growth in equities.
Evercore ISI notes that a September rate cut by the Federal Reserve is now "cemented" due to "extreme volatility, fears of recession, and slow AI [artificial intelligence] adoption."
Historically, the S&P 500 tends to dip around the first rate cut but typically underperforms its long-term trend over the following 12 months.
However, Evercore says the trajectory of equities heavily depends on the economic outcome—stocks tend to rise in a soft or no landing scenario and fall if a recession materializes.
Currently, Evercore ISI sees no material signs of a recession. The firm notes that the U.S. S&P Composite PMI indicates ongoing economic expansion, and earnings estimates remain steady with strong EPS growth percentages.
Additionally, Evercore highlights that weekly jobless claims are muted, and consumer confidence is stable, suggesting the economy remains resilient.
While acknowledging that growth may slow in the second half of 2024, the investment firm emphasizes that any market corrections, or "air pockets," should be viewed as buying opportunities.
They explain that these corrections are seen as part of normal market behavior and should not deter investors from long-term structural trends, especially given the expanding scope of generative AI (GenAI).
Overall, Evercore ISI's base case for the S&P 500 remains bullish, with the index expected to reach 6,000 by year-end, supported by a stable economy and continued earnings growth.
"Even amidst a Hard Landing recession the ongoing effects of the Pandemic stimulus could blunt its impact and support longer term outperformance as was seen in the decades following previous M2 spikes in the 1920s and 1950s," Evercore concludes.