Why a call for 5,100 on the S&P in 2024 may not be that bullish
One of Wall Street's most bullish strategists headed into 2024 doesn't actually see his stance as that bullish.
Deutsche Bank's chief US equity strategist Binky Chadha sees the S&P 500 hitting 5,100 by the end of 2024, even with the economy fighting through a mild recession. If the US once again skirts recession, there's even more upside, per Chadha, and the S&P 500 could hit 5,500.
"I would argue that neither is a bullish as it sounds," Chadha said through a smirk at a 2024 outlook media roundtable on Wednesday.
Chadha titled his 2024 outlook "solid fundamentals, poor perceptions," a nod to the consistent clamoring an economic slowdown is coming despite companies largely holding up OK over the past year. To Chadha, the recession some have dubbed as one of the most anticipated ever, is already baked into the market and any sell-off would be "short lived."
Key to Chadha's call is his belief that the current view on earnings is skewed. Using year-over-year comparisons Chadha notes that earnings just came out of several quarters of negative growth during the most recent quarter. But when comparing earnings growth quarter-over-quarter, which Chadha prefers, earnings have actually been accelerating through all of 2023.
In Chadha's terms, he notes earnings have grown about 11.5% this year through the third quarter. Next year's projection for $250 in earnings per share would reflect just under 10% growth in earnings for the year.
"Things are not really going anywhere," Chadha said. "This is actually a pretty run of the mill forecast. It's just the belief is so negative, that it sounds bullish."
To Chadha, where the bullishness could come in would be if the economy once again surprises to the upside in 2024. If the economy grows closer to a 2% annual rate in 2024, that would push his S&P 500 EPS call to about $270, resulting in the S&P 500 sitting at 5500.
The chart below from Deutsche Bank shows how the economic forecast would impact their call on earnings, and therefore, the S&P 500 next year.
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