The S&P 500 index is having a spectacular rally despite last week’s hawkish Federal Reserve decision. It soared to a record high, bringing the year-to-date gains to over 14%. It has also soared by more than 55% from its lowest level in 2022.
Strong S&P 500 forecasts
This surge has been good news for ETFs that track the S&P 500 like the SPDR S&P 50 ETF (SPY), iShares Core S&P 500 (IVV), Vanguard S&P 500 (VOO), and SPDR Portfolio S&P 500 ETF (SPLG) that have also jumped.
There are some more good news about these funds as more analysts turn extremely bullish on the index. In a statement during the weekend, an analyst at Evercore ISI boosted his outlook fo r the index to $6,000, implying a 10% increase from the current level.
Julian Emanuel’s rate upgrade is important because he has been one of the last bears in Wall Street. For a long time, he has argued that the index would end the year at around $4,750 or a 12% decline from the current level. In a note, he said that:
“Record stimulus, elevated cash balances and low leverage support the consumer. Then came AI. Today, GenAI’s potential in every job and sector is inflecting. The backdrop of slowing inflation, a Fed intent on cutting rates and growth support Goldilocks.”
Emanuel is not the only Wall Street bear to change his mind this year. A few months ago, Mike Wilson, one of the most respected Wall Street analysts, changed his tune and boosted his outlook for the index. Wison was voted the best analyst in 2022 as his bearish outlook of the S&P 500 index worked well.
Most analysts are now bullish on the S&P 500 index. On Friday, analysts at Goldman Sachs boosted their estimate for the index to $5,600 from $5,200. In a note by David Kostin, he noted that earnings of most S&P 500 index companies were strong. Other analysts at UBS and BMO Capital have a bullish outlook for the index.
S&P 500 earnings growth
Recent data by FactSet showed that most American companies reported strong quarterly earnings. The average earnings growth of S&P 500 index companies stood at 5.4%, the highest level since 2020.
Stocks will also be boosted by the Federal Reserve, which pointed to one rate cut this year. A rate cut will be positive for stocks because of the vast sums of money invested in money market funds.
The most recent data showed that these funds hold over $6.1 trillion as investors take advantage of the substantial returns. Some of these funds will rotate back to bonds to equities when interest rates start moving downwards.
Looking ahead, the key catalysts for the S&P 500 index will be earnings by companies like Lennar, KB Homes, Accenture, Kroger, Darden, Advance Auto Parts, FactSet, and CarMax.
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