S&P 500 is expected to rise another 10%! Two well-known Wall Street strategists are bullish on US stocks in unison
Two top strategists on Wall Street have become more optimistic about the US stock market, believing that the S&P 500 index is expected to rise by 10%. Michael Wilson of Morgan Stanley and David Kostin of Goldman Sachs pointed out that a strong labor market, economic resilience, and interest rate cuts are the main reasons. Wilson raised his view on cyclical stocks, while Kostin increased his expectations for next year's earnings growth of S&P 500 component companies, raising the target from 6000 points to 6300 points
According to the financial news app Zhitong Finance, two top strategists on Wall Street have become more optimistic about the US stock market. The reason is that there are signs indicating a strong labor market in the US, resilient economy, and declining interest rates.
Michael Wilson, one of the most pessimistic strategists on Wall Street until mid-2024 and from Morgan Stanley, stated that the explosive growth in employment data released last Friday, along with expectations of further rate cuts by the Federal Reserve, have increased his view on cyclical stocks relative to safer defensive stocks.
Meanwhile, Goldman Sachs CEO David Kostin has raised his expectations for next year's earnings growth of S&P 500 index component companies due to robust macroeconomic prospects driving profit margins. This strategist has raised the 12-month target of the benchmark index from 6000 points to 6300 points, implying a potential increase of about 10% from the current level.
Wilson wrote in a report, "In terms of the stock market's response to employment/economic growth data, we still believe we are in a 'good is good' environment. Doubts in the bond market about a soft landing outcome are diminishing, which is an important signal for stock investors."
Due to reduced concerns about economic recession and Fed easing policies, US stocks have continued to rebound after a summer sell-off. According to derivatives data, traders expect the Fed to cut rates by another 100 basis points before May next year. The strong employment data released last Friday, which exceeded expectations, also boosted market sentiment.
Wilson stated that this is a positive sign for US small-cap stocks, as they will benefit from improved business activity and sentiment, as well as reduced investor positions. This strategist has reduced long-term bets on large-cap stocks, citing a weakening risk-return profile in the short term.
In various sectors, Wilson has upgraded the rating of financial stocks to "hold" and downgraded the ratings of healthcare and consumer staples.
JPMorgan Chase (JPM.US) is expected to announce its latest earnings on Friday, providing the latest update on bank profitability and officially kicking off the earnings season