A woman walks past a Deutsche Bank branch in Cologne, Germany. Reuters
Deutsche Bank has increased its year-end target for the S&P 500 to 5,500, the highest forecast among major financial firms. The bank expects strong corporate earnings to push the index to this new target, which is about 4% higher than its previous prediction of 5,100 points. The S&P 500’s last close was at 5,303.27, putting the new target within reach by year’s end.
Oppenheimer Asset Management is another firm predicting a similar outcome, also setting its year-end target for the S&P 500 at 5,500. Both firms believe corporate earnings will play a pivotal role in pushing stock prices higher.
In a statement, Deutsche Bank strategists, led by Binky Chadha, emphasized their confidence in the continued growth of earnings. "While not all the growth may happen this year, we expect market optimism to rise by the end of 2024, which will drive equity valuations higher," Chadha wrote in a note on Friday. This positive sentiment is supported by expectations of continued recovery in both economic performance and corporate profitability.
Other experts are also revising their forecasts upwards. Morgan Stanley’s Michael Wilson now expects the S&P 500 to reach 5,400 by June 2025. Wilson had earlier predicted the index would only hit 4,500 by the end of 2023. He believes that earnings will grow more than previously thought over the next two years, thanks to steady revenue growth and improved profit margins, especially in 2025.
In addition to raising its overall S&P 500 target, Deutsche Bank also increased its earnings-per-share (EPS) forecast for companies in the index. They now expect EPS to reach $258, up from their previous estimate of $250. If the economy continues to grow at a strong pace, Deutsche Bank projects EPS could rise even further to $271 in 2024.
This optimistic outlook comes at a time when the S&P 500 and other major indices are hitting new highs. Last week, the S&P 500 reached record levels, driven by a smaller-than-expected increase in inflation. Meanwhile, the Dow Jones crossed the 40,000 mark for the first time in history, reflecting growing confidence in the economic recovery.
Deutsche Bank’s latest update also reflects a shift in their broader economic outlook. Earlier this year, the bank had anticipated a U.S. recession in 2024. However, they revised this forecast in February, now expecting the economy to avoid a recession altogether. This improved economic outlook is a key reason behind their bullish forecast for the S&P 500.
