Will the S & P 500 Reach 5,000 by the End of the Year?
Morgan Stanley Investment Management’s Andrew Slimmon, along with other experts on Wall Street, predicted earlier this year that the S & P 500 would reach the 5,000 level. Despite recent market volatility, Slimmon remains optimistic that the index will be closer to 5,000 than 4,000 by the end of the year. He believes that if the rates market stabilizes, the equity market will recover and rally. Slimmon’s prediction is based on several factors, including decreasing inflation, positive earnings growth, and fiscal spending approved by the U.S. government.
Inflation and Earnings Growth
Slimmon explains that as inflation decreases, the U.S. Federal Reserve will be less hawkish. Additionally, he expects earnings growth to turn positive in 2024, with decent Q3 earnings reports contributing to this trend. He predicts a 12% earnings growth for next year.
Fiscal Spending and Market Sentiment
The U.S. government’s approved fiscal spending serves as another liquidity injection into the economy, according to Slimmon. He believes that as the fear of missing out (FOMO) replaces fear, money that has been sitting out the rally will begin to flow back into the market. This sentiment, combined with the factors mentioned above, supports Slimmon’s prediction of the S & P 500 reaching 5,000.
Stocks to Watch
If the market does rally into the year-end, Slimmon suggests that the “Magnificent Seven” stocks will lead the way. These stocks include Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla. Slimmon specifically mentions Microsoft as his preferred play, highlighting the tech giant’s 365 Copilot feature and its potential impact on earnings. However, he advises investors to balance their portfolios with value stocks in the financial and industrial sectors, naming Ameriprise and United Rentals as two stocks to consider buying.