Fear of recession receding: This could continue for the US stock market in the S&P 500 until the end of the year

• Economic data come out stronger than expected
• Fears of recession are fading
• Price targets for S&P 500 raised

GDP and consumer prices are better than expected

In recent months, investors have watched the monetary policy decisions of the US Federal Reserve with eagle eyes. The prevailing fear was that interest rate increases to curb high inflation rates could overshoot the monetary authorities’ target and plunge the US economy into recession. However, current economic data give cause for relaxation. US gross domestic product (GDP) rose by 2.4 percent year-on-year in the second quarter, significantly more than analysts had expected. In addition, private consumption contributed to 70 percent of US GDP.

Consumer prices rose 0.2 percent month-on-month in July, up 3.0 percent year-on-year. And job growth in the USA was also robust: According to the US Department of Labor, 187,000 new jobs were created in the private sector and the state in July. At the same time, the unemployment rate fell from 3.6 percent to 3.5 percent.

Recession warnings are fading

Accordingly, some experts are rowing back again when it comes to economic horror scenarios. While the major US bank Goldman Sachs recently stated that the likelihood of a recession in the US for 2024 has decreased, its competitor Bank of America is also talking about a “soft landing”. According to stock market expert Jim Cramer, the recession is unlikely to happen.

Confident outlook for US equities

The absence of the feared recession should also benefit the stock market, as Wall Street experts now expect. Several analysts recently raised their price targets for the S&P 500. The index of the 500 largest listed US companies has increased by 13.81 percent since the beginning of the year and was last listed at 4,369.71 points (closing price on August 18, 2023).

Jefferies analyst expects ‘soft landing’

Jefferies analyst Desh Peramunetilleke is assuming a much friendlier environment for shares. “With a soft landing now more likely, earnings will be much more resilient than previously anticipated,” the analyst recently predicted, according to Yahoo Finance. The S&P 500 should be at 4,500 points by the end of the year, according to Peramunetilleke. The expert for the US index previously estimated a year-end target of 4,050 points. In a bull scenario, the index could even jump to up to 4,850 digits, as the stock market expert is quoted as saying by “Seeking Alpha”. In a weak market environment, however, the S&P 500 could go down to 3,500 points. In this case, the US economy slips into a recession comparable to that after the bursting of the dot-com bubble in 2000.

Citigroup expert sees S&P 500 at 5,000 points by mid-2024

Citigroup strategist Scott Chronert was even more optimistic: As the analyst stated in a customer note that is available on the online portal. Chronert also considers a soft charge to be likely and in the course of this assessment increased his price target for the S&P 500 from 4,000 to 4,600 points at the end of the year. In mid-2024, the stock market barometer should even have climbed to 5,000 points instead of the previously expected 4,400 units. According to the strategist, there will be accelerated earnings growth in the coming year, as “Investing.com” reports. Until then, investors could use short-term price setbacks to get started.

Piper Sandler: S&P 500 Driven by Stock Market Broadening

Piper Sandler’s price target for the broad index was also recently raised. According to an article by “MarketWatch”, the S&P 500 should rise to 4,825 points by the end of the year instead of the previously assumed 4,625 points. However, the two analysts Craig Johnson and Scott K. Smith mainly explain the jump in price with an increasing breadth of the US stock market. The market is registering more new entries than delistings, which indicates a sustained upward trend. The S&P 500 should also benefit from this.

Goldman Sachs observes “unspectacular growth”

Jan Hatizus, chief economist at Goldman Sachs, does not see the latest economic data as a signal that the economic situation in the USA is on the right track, but the figures can certainly serve as an indication of “unspectacular growth”, according to the expert, according to Yahoo Finance. This slightly positive development could not only support the entire stock market, but also drive entire sectors and make investments in them appear more attractive.

In June, Hatizus’ Goldman colleague David J. Kostin raised his price target for the S&P 500 from 4,000 to 4,500 points by the end of the year. In July, he told Bloomberg news agency that steady economic growth and moderating inflation are not taking away from the high valuations of the seven largest stocks in the S&P 500 – namely Apple, Microsoft, Amazon, NVIDIA, Tesla, Alphabet (A) and Meta should. Should the remaining 493 members continue to increase in profit and sales, the P/E of the index could increase to 21. Most recently, the P/E of the stock market barometer was 20.28 according to the “Wall Street Journal” (as of August 20, 2023). In this case, the S&P 500 could reach a level of 4,825 points, Kostin told the agency.

Oppenheimer Chief Strategist Praises “Resilience of the US Economy”

Oppenheimer chief investment strategist John Stoltzfus sees the index, which is often used as an indicator for the entire US stock market, even at 4,900 points at the turn of the year. Previously, the price target was 4,400 places. “Our price target assumes continued US economic resilience and the Federal Reserve raising interest rates further to slow inflation towards its 2% target,” the analyst wrote in a report, according to Yahoo Finance.

Whether the Wall Street experts are right with their price targets, along with other economic data, time will tell.

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