As the first quarter of 2024 comes to an end, strategists at RBC Capital Markets lifted their 2024 year-end target price for the S&P 500 from 5,150 to 5,300, representing an 11% increase compared to the closing figures of December 2023.
“We consider our price target to be a signaling mechanism for our overall message on the potential direction of the US equity market from here. It’s a compass, not a GPS,” strategists noted.
“The story we see in the data today is that the strong move observed in the S&P 500 so far this year has been deserved, and a rational case can be made for additional upside from here,” they said.
However, their analysis also indicates that future gains may be harder to achieve, signaling the market might need to “take a breather.”
As the year progresses, RBC’s stance is more neutral compared to recent months, yet it remains decidedly out of the bearish territory. Overall, strategists believe the potential for upside outweighs the downside risks as the year ends.
Simultaneously, the broker also updated its 2024 earnings per share (P) forecast for the S&P 500. The revised EPS forecast now stands at $237, remaining below the broader market's bottom-up consensus estimate of $243.
The projection is derived from a modeled income statement for the S&P 500, incorporating projected revenue growth, interest expenses based on consensus forecasts for crucial economic indicators, and assumptions about profit margins, stock buybacks, and taxation policies, RBC noted.
“We think the market’s view of where economic fundamentals are heading, rather than any one economist’s or strategist’s view, is what ultimately drives stock market pricing,” it added.