The S&P 6,000 calls are starting to feel reasonable: Morning Brief
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The bulls continue to run loose on Wall Street.
The S&P 500's (^GSPC) 40th record close of the year on Monday now puts the index less than 5% from 6,000.
And with the Federal Reserve's anticipated string of interest rate cuts on the horizon, some analysts expect to see that big 6,000 milestone soon.
"Now that the Fed is officially in easing mode, even as the US economy continues to grow nicely, the proverbial path of least resistance for stocks is likely to higher levels," DataTrek co-founder Nicholas Colas wrote in a note to clients on Monday.
Colas admitted that 6,000 would be a "peak confidence" price target. But he's not the only person publishing research that's feeling bullish. Last Thursday, BMO Capital Markets chief investment strategist Brian Belski boosted his year-end target to 6,100 from 5,600, the most bullish call among the equity strategists tracked by Yahoo Finance.
"Much like our last target increase in May, we continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted," Belski wrote.
Perhaps the most striking part of Belski's increase was that it didn't come with a boost to his projection for earnings this year. Per Belski's math, if the S&P 500 were trading at 6,100 by the end of this year, it'd be sitting at a price-to-earnings ratio of 24.4x, well above the 10-year average of roughly 18x.
Belski recognized this "may seem elevated relative to historical norms." But looking at the closest historical analog is often more compelling than averages — which puts 1995's soft landing in focus.
"[That was] a period where the index was able to sustain a greater-than-20x multiple for several years," Belski noted.
On the other hand, RBC Capital Markets head of US equity strategy Lori Calvasina isn't moving her target of 5,700 just yet.
Calvasina admitted there are "upside risks" to that forecast should the economy hold up. But the strategist did caution in a weekly Sunday evening note to clients that the good times often come with hiccups. An election is coming, and the net bullish reading from the American Association of Individual Investors is high enough to read "flirting with danger."