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• The S&P 500 index has staged a strong recovery in the past few months.
• Analysts at Deutsche Bank and Bank of America are optimistic about the index.
• JPMorgan analysts are a bit concerned about the S&P 500 index.

The S&P 500 index has done well in 2023, helped by the so-called Magnificent 7. It initially jumped to a high of $4,607 in July and then pulled back to $4,103 in October. It has now bounced back and is slowly nearing its highest point this year. In all, it has jumped by over 30% from its lowest point in 2022.

Wall Street forecast for S&P 500 (SPX)

Analysts from leading Wall Street firms like JPMorgan, Goldman Sachs, Deutsche Bank, and Wells Fargo have delivered their S&P 500 index forecast for 2024. JPMorgan is the most pessimistic of these companies as it expects it to drop to about $4,200. That is a 8% decline from the current level.

Morgan Stanley is also quite gloomy about the index as it expects it to drop to about $4,500. This is notable because Mike Wilson, the bank’s lead analyst, is also known for his bearish views about America’s equities. 

On the other hand, other Wall Street analysts like in Deutsche Bank, Wells Fargo, and Bank of America believe that the index will continue rising.

The most optimistic of these banks is Deutsche Bank, which sees it soaring to over $5,100 in 2024. Bank of America analysts see it rising to $5,000 while Goldman Sachs, Wells Fargo, and Societe Generale see it rising to above $4,700.

Federal Reserve, elections, and earnings

The key drivers for the S&P 500 index will be the Federal Reserve, US elections, and corporate earnings. Most economists now believe that the Fed will start to cut interest rates in the second quarter of the year. Bill Ackman sees it slashing in the first quarter.

The Fed, like other central banks, has been quite hawkish in the past two years as it fought against inflation. To a large extent, they are winning this inflation fight although prices remain higher than they were before the pandemic.

In the United States, the headline consumer inflation has dropped from the pandemic high of 9.1% to 3.2%. There are signs that prices will continue falling in the coming months now that gasoline prices have retreated.

The other important catalyst for the SPX index will be the US election. It is still too early to predict who will win the general election. It is also unclear who the presidential candidates will be because of Trump’s legal issues and Joe Biden’s age.

Investors will also focus on corporate earnings. There are signs that corporate earnings will do well in 2024 as the US avoids a recession. According to FactSet, very few companies have talked about recession and inflation in the past few earnings. The number of companies that mentioned recession in Q3 was 13% below the previous quarter.

The SPX index has an important risk, however. Its risk is that the gains in 2023 were driven by the big technology companies like Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), and Apple (AAPL). Most of the other companies, known as S&P 493 have not done as well. Therefore, the risk is that these 7 companies could retreat in 2024 and drag the broader index.

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