US stocks fall with disappointing results for the retail sector, and Nvidia’s results on deck

Bank of America expects the S&P to close 2024 at 5,000

The good news is that investors are already talking about any potential bad news.

That’s the message from Bank of America Global Research’s equity strategy team led by Savita Subramanian, which sees the S&P 500 (^GSPC) hitting a record high in 2024 in a year that will be a “stock picker’s paradise.”

The company expects the S&P 500 to close 2024 at 5,000, up about 10% from its current price, with markets already past “maximum aggregate uncertainty.”

“We are optimistic not because we expect the Fed to cut interest rates but because of what the Fed has accomplished,” Subramanian explained. “Businesses have adapted…to higher interest rates and inflation.”

Bank of America expects earnings to grow 6% in 2024 to $235 per share. Subramanian’s team previously told Yahoo Finance that not only do they believe the earnings slump is over, but that companies are poised to outperform even if the economy takes a downturn.

“Companies cut costs and adapted to the weaker demand environment, and saw earnings grow again in Q3 (+3% y/y),” Subramanian wrote. “History suggests that earnings typically recover stronger than they decline, as downturns typically remove excess capacity, resulting in a leaner cost structure and improved profit margins.”

However, the best path forward for stocks is higher earnings with positive GDP, which is consistent with Bank of America economists’ call for no recession in 2024, Subramanian’s team writes.

Bank of America’s call for stocks to rise as the economy avoids a recession is in line with what Goldman Sachs detailed in its 2024 outlook. Both research teams explained that the worst-case scenario for stocks would be if the Fed’s rate-cutting cycle begins and the economy heads toward a recession. .

“Bulls should hope the economy improves, leading to an easing of the credit cycle, rather than the Fed leading a weaker economy,” Subramanian wrote.