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Wells Fargo revised its S&P forecast to 5,535, analyst Christopher Harvey told CNBC.
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This is Wall Street’s highest target for the benchmark index, and comes as secular AI investing will keep pushing large-caps higher.
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Other catalysts include a multi-year Fed easing cycle, M&A activity, and political shifts.
Stuttering economic growth will not stop the S&P 500 from bounding higher, according to a Wells Fargo analyst who now expects the benchmark to reach a record 5,535 by this year’s end.
The new forecast eclipses all other Wall Street bets, and represents over 7% upside from the S&P’s current level. It’s a revision from Wells Fargo’s previously held forecast of 4,625.
In an interview with CNBC, analyst Christopher Harvey explained his reasoning behind the projection, outlining that has little to do with hot growth in the economy or bets on a quick interest rate pivot:
“What it is, is people looking further and further out. They’re getting more and more aggressive with their discounting. We’re going into that period of greed,” the head of equity strategy told the outlet on Wednesday.
Within this trend is the fact that artificial intelligence has turned into a secular market narrative, and is no longer a discretionary theme that will phase out.
That means that the current market winners will keep gaining market share, he said, and won’t require GDP growth to maintain its current momentum to drive their own strength.
“What you’re seeing in the market is what you’re going to see on the earnings side, the winners will keep winning.” “You don’t need a strong economy for large-caps, because you’re going to get a market share shift,” Harvey said, adding: “You can do it with GDP at 2%, 2.5%.”
Further bolstering the bullish outlook is the fact that markets are facing a multi-year easing cycle, whatever the timing and pace of the Federal Reserve’s interest rate cuts, he said. Added are Harvey’s predictions that M&A activity should pick up, and the possibility of political shake-up in the coming election season.
“Even though we’re high in the street, I don’t feel bullish,” he said. “It’s not that ‘wow, multiples are so cheap, things are gonna be fantastic. The economy’s on fire, the Fed’s cutting rates and they’re gonna start slashing tomorrow.’ No.”
Wells Fargo is now among a handful of other Wall Street banks that have lifted their S&P outlook. Behind his forecast are UBS and Bank of America, which expect the index to reach 5,400 by year-end.
Goldman Sachs, Morgan Stanley, and JPMorgan hold targets of 5,200, 4,500, and 4,200, respectively.
Read the original article on Business Insider