Macro

BMO Capital Sets S&P 500 Target at 5,600, Tops in Analysis

BMO Capital raises S&P 500 year-end target to 5,600, citing strong market momentum and historical performance patterns.

By Bill Bullington

5/15, 10:17 EDT
S&P 500
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Key Takeaway

  • BMO Capital Markets raises its S&P 500 year-end target to 5,600, a nearly 10% increase and the highest among Wall Street analysts.
  • The revision reflects underestimation of market momentum, despite no change in earnings targets.
  • Historical patterns suggest continued gains for the S&P 500, with expectations of a significant pullback occurring at much higher levels.

S&P 500 Surges to Record Highs

The S&P 500 Index has experienced a significant rally, reaching record highs and prompting BMO Capital Markets to revise its year-end target for the index upwards by almost 10%, setting a new goal of 5,600 from the previous 5,100. This adjustment reflects a bullish outlook, with the new target standing approximately 6.7% above the index's closing on Tuesday. This optimism is based on the index's strong performance, which has notably rebounded from its October 2023 low. "In late February we decided to draw a line in the sand with respect to our 2024 S&P 500 price target of 5,100 since we believed market performance had run a little too far, too fast given the significant rebound from the Oct′23 low. Now that roughly three months have passed since that report it has become clear to us that we underestimated the strength of the market momentum," stated Brian Belski, a strategist at BMO Capital Markets.

Market Momentum Underestimated

BMO Capital Markets has maintained its market-wide earnings target, indicating that the upward revision of the S&P 500 target is primarily attributed to underestimating the market's momentum rather than changes in fundamental earnings expectations. This scenario mirrors the market rallies observed in 2021 and 2023, where the strength of market momentum was similarly underestimated. Belski emphasizes the importance of recognizing historical performance patterns, which suggest that the year-to-date (YTD) performance level could lead to continued gains in the market. Despite expectations of a significant pullback, Belski now believes any downturn will occur from a much higher level than previously anticipated, setting the stage for a rebound from a higher base.

Historical Patterns and Future Expectations

The S&P 500's intraday all-time high on Wednesday morning, trading near 5,279, underscores the market's robust performance and the potential for further gains. Belski's analysis points to historical performance patterns as a basis for continued optimism, suggesting that the market's momentum could sustain its upward trajectory. This perspective is crucial for investors looking to gauge the timing and potential magnitude of future market movements. Despite the anticipation of a more significant pullback, the expectation is that it will start from a higher level, implying a stronger market foundation for future growth.

Street Views

  • Brian Belski, BMO Capital Markets (Bullish on the S&P 500):

    "In late February we decided to draw a line in the sand with respect to our 2024 S&P 500 price target of 5,100 since we believed market performance had run a little too far, too fast given the significant rebound from the Oct′23 low. Now that roughly three months have passed since that report it has become clear to us that we underestimated the strength of the market momentum... Historical performance patterns suggest continued gains given the level of YTD performance. And while we still expect there to be a more significant pullback at some point, it is likely to occur at a much higher level than we previously anticipated, meaning the eventual rebound will also begin at a higher base."