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Should You Play S&P 500 ETFs on Bullish Analyst Bets?
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Goldman Sachs Group Inc. strategists have boosted their forecast for the S&P 500 Index, now targeting 5,200 by year-end, citing increased profit estimates as the driving factor. This marks a 3.9% jump from the current levels, following the index surpassing 5,000 earlier this month (read: 5 ETFs at All-Time Highs as S&P 500 Rally Continues).
The firm also upgraded their earnings-per-share forecast, projecting $241 for this year and $256 for 2025, reflecting expectations of stronger economic growth and higher profits, particularly in the information technology and communication-services sectors.
Goldman's optimism aligns with other bullish forecasts on Wall Street, including those from Tom Lee of Fundstrat Global Advisors and John Stoltzfus of Oppenheimer Asset Management, per Bloomberg, as quoted on Yahoo Finance.
Meanwhile, some analysts, like those at Bank of America Corp., suggest that current targets may underestimate market potential. Savita Subramanian believes their target of 5,000 is conservative, echoing sentiments shared by other analysts.
Even Michael Wilson of Morgan Stanley, typically bearish, anticipates broader market gains beyond big tech companies. Despite maintaining a target of 4,500 for 2024, implying a modest drop, Wilson suggests a shift towards less favored sectors in the market.
While the S&P 500 has already climbed 4.9% this year, supported by expectations of a dovish Fed policy and enthusiasm around artificial intelligence, analysts anticipate further growth.
What About Valuation Level?
The index breached the 5,000-level for the first time The index's forward price-to-earnings ratio, a key measure of stock valuation, has surged to 20.4 times, surpassing its historic average of 15.7 and reaching a level last seen in February 2022, according to LSEG Datastream, per Reuters, as quoted on Yahoo Finance.
Research from Evercore ISI indicates that when the S&P 500 trades at its current valuation of 22 times trailing twelve-month earnings, subsequent one-year performance tends to be flat on average. The S&P 500's valuation is influenced significantly by its largest stocks, with the top seven mega-cap companies, including Apple, Microsoft, and Nvidia, comprising 29% of the index and trading at an average of 34 times earnings.
While an optimistic earnings outlook could alleviate valuation concerns, profit expectations for 2024 have remained relatively stable. S&P 500 companies are projected to increase earnings by 9.7% this year, according to LSEG data. Bloomberg Intelligence data suggests an 8.8% profit increase in 2024 compared to the previous year.
Ned Davis Research estimates the index to be more than 5% overvalued based on historical P/E trends since 1964, but notes that it remains far from bubble levels. Against this backdrop, investors with a strong stomach for risks can play S&P 500 ETFs like
ETFs in Focus
Against this upbeat backdrop, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY - Free Report) .
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Should You Play S&P 500 ETFs on Bullish Analyst Bets?
Goldman Sachs Group Inc. strategists have boosted their forecast for the S&P 500 Index, now targeting 5,200 by year-end, citing increased profit estimates as the driving factor. This marks a 3.9% jump from the current levels, following the index surpassing 5,000 earlier this month (read: 5 ETFs at All-Time Highs as S&P 500 Rally Continues).
The firm also upgraded their earnings-per-share forecast, projecting $241 for this year and $256 for 2025, reflecting expectations of stronger economic growth and higher profits, particularly in the information technology and communication-services sectors.
Goldman's optimism aligns with other bullish forecasts on Wall Street, including those from Tom Lee of Fundstrat Global Advisors and John Stoltzfus of Oppenheimer Asset Management, per Bloomberg, as quoted on Yahoo Finance.
Meanwhile, some analysts, like those at Bank of America Corp., suggest that current targets may underestimate market potential. Savita Subramanian believes their target of 5,000 is conservative, echoing sentiments shared by other analysts.
Even Michael Wilson of Morgan Stanley, typically bearish, anticipates broader market gains beyond big tech companies. Despite maintaining a target of 4,500 for 2024, implying a modest drop, Wilson suggests a shift towards less favored sectors in the market.
While the S&P 500 has already climbed 4.9% this year, supported by expectations of a dovish Fed policy and enthusiasm around artificial intelligence, analysts anticipate further growth.
What About Valuation Level?
The index breached the 5,000-level for the first time The index's forward price-to-earnings ratio, a key measure of stock valuation, has surged to 20.4 times, surpassing its historic average of 15.7 and reaching a level last seen in February 2022, according to LSEG Datastream, per Reuters, as quoted on Yahoo Finance.
Research from Evercore ISI indicates that when the S&P 500 trades at its current valuation of 22 times trailing twelve-month earnings, subsequent one-year performance tends to be flat on average. The S&P 500's valuation is influenced significantly by its largest stocks, with the top seven mega-cap companies, including Apple, Microsoft, and Nvidia, comprising 29% of the index and trading at an average of 34 times earnings.
While an optimistic earnings outlook could alleviate valuation concerns, profit expectations for 2024 have remained relatively stable. S&P 500 companies are projected to increase earnings by 9.7% this year, according to LSEG data. Bloomberg Intelligence data suggests an 8.8% profit increase in 2024 compared to the previous year.
Ned Davis Research estimates the index to be more than 5% overvalued based on historical P/E trends since 1964, but notes that it remains far from bubble levels. Against this backdrop, investors with a strong stomach for risks can play S&P 500 ETFs like
ETFs in Focus
Against this upbeat backdrop, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY - Free Report) .