The stock market has a new high-water mark for 2024 projections.
Strategists from BMO Capital Markets and Deutsche Bank expect the S&P 500 (^GSPC) to reach 5,100 by the end of next year, the highest projection for the benchmark index yet among Wall Street strategists tracked by Yahoo Finance.
This would mark a new all-time high for the S&P 500, which peaked at 4,796 in January 2022.
"We believe 2024 will be Year 2 of at least a 3-5 year process that will see US stocks exhibit more normal and typical performance, paced by a backdrop of normal and typical GDP and earnings growth, valuation, and bond yield ranges," BMO chief investment strategist Brian Belski wrote.
Belski's research shows that the S&P 500 usually returns about 11% in the second year of a bull market, making his call for 5,100 by the end of 2024 about in line with the historical average.
Both Deutsche Bank and BMO see the S&P 500 delivering earnings per share of $250 in the year ahead, the highest projections on Wall Street thus far. The higher projection for earnings pushes both calls for the S&P 500 just above the 5,000 predictions Bank of America and RBC released last week.
Notably, earnings growth has all four firms feeling confident the S&P 500 can continue to trade at a higher valuation than its historical standard.
"If earnings growth continues to recover as we forecast, valuations will remain well supported around the top of the range as is typical on the pricing in of a pickup in earnings growth," Deutsche Bank's team of analysts wrote in a note on Monday.
Both BMO and Deutsche Bank think stocks will be fine if a recession comes in the first half of 2024. Belski at BMO described a potential downturn as a "chicken little recession" and noted that the continued strength of the labor market makes him confident the US economy would hold up enough, meaning it would just be a "recession in name only."
Deutsche Bank's team has a clear call for a recession in the first half of 2024 and economic growth falling below trend as GDP grows just 0.6% in 2024. But that doesn't mean stocks will tank.
"Given [a recession] is widely anticipated, and expected to be mild and short, we see only a modest short-lived selloff," Deutsche Bank's team wrote.
From a sector perspective, Belski and BMO noted that investors will need to own a "little bit of everything" in 2024, which he noted is a "sharp contrast" from the "Magnificent Seven"-led rally of 2023.
"We believe active investment strategies will be even more important next year as many of the largest stocks that drove performance within sectors are unlikely to maintain that momentum in 2024, forcing investors to search for other opportunities further down the market cap spectrum," Belski wrote.
Josh Schafer is a reporter for Yahoo Finance.
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