U.S. stocks are in a bull market and will post “solid” gains in 2024, even as returns are lower than this year, BMO Capital Markets strategists said on Monday.
In a market outlook report, BMO Chief Investment Strategist Brian Belski and his team projected the benchmark S&P 500 would end 2024 at 5,100, nearly 12% above Friday’s closing level. The index is up more than 18% so far in 2023.
“We continue to believe that US stocks are in a bull market that has now entered its second year,” the BMO strategists wrote in their report, adding that historical bull market performance patterns “suggest lower, but still solid gains.”
Investors have various definitions of a bull market, although one common definition requires the S&P 500 to reach a new all-time high to confirm a bull market. The index has yet to breach its January 2022 record closing high of 4,796.56 in its rally this year.
Separately on Monday, strategists at Deutsche Bank also forecast the S&P 500 would end 2024 at 5,100.
BMO sees S&P 500 earnings rising about 13.6% in 2024, a “significant rebound” from this year. Earnings are expected to climb just 2.6% for 2023, according to LSEG data.
“We also believe that volatility is likely to subside as macro-environment resiliency continues to surprise alongside falling inflation,” the BMO strategists said.
The firm expects “very different” market leadership patterns next year with much more participation outside of the megacap stocks that have propelled equity indexes higher this year.
“We believe investors will need to own a little bit of ‘everything’ and not tilt too far in one direction or another from a sector, style, and size perspective – a sharp contrast to the trends that prevailed during 2023,” the BMO strategists said.