Stock market outlook: Top Wall Street bear reverses and now sees the S&P 500 hitting 6,000

Julian Emanuel, the firm’s chief equity and quantitative strategist, raised his year-end forecast on the S&P 500 Index to 6,000, the highest among major equity strategists tracked by Bloomberg — and roughly 10% above the gauge’s closing level on Friday. That’s an about face from one of Wall Street’s most prominent bears who previously expected the gauge to finish the year at 4,750.

Optimism over a resilient economy, improving corporate earnings and the end of the Federal Reserve’s tightening cycle has pushed the S&P 500 up 14% this year, and Emanuel says ebbing inflation and artificial-intelligence fervor will propel stocks even higher. Emanuel’s new estimate tops the 5,600 level Goldman Sachs Group Inc.’s David Kostin, UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski are penciling in.

“The pandemic changed everything,” Emanuel wrote in a note to clients on Sunday. “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 also raised his estimate for the index’s per-share earnings in 2024 and 2025 to $238 and $251, respectively. The new levels imply a 8% and 5% profit growth, he said.

The S&P 500’s jump to 6,000 by late December on EPS of $238 will push the gauge’s price-to-earnings multiple to 25 on a trailing basis, Emanuel said. While definitely elevated by historical standards, that’s still short of the 28 level during the dot-com peak, Emanuel said. He sees a possibility of the 500-member index reaching 7,000 by the end of 2025, he added.

While AI exuberance has pushed valuations “to the top decile since 1960,” the S&P 500’s price-earnings multiples may remain elevated for “extended periods,” Emanuel said.

The move comes after Goldman’s Kostin on Friday upgraded the firm’s year-end target for the S&P 500 for a third time, reflecting Wall Street’s optimistic outlook for earnings growth and the US economy. Among the big Wall Street banks, JPMorgan Chase & Co. has the lowest year-end target for the S&P 500 at 4,200, implying a drop of more than 20% from Friday’s closing level.