The
S
&
P
500
is
in
for
yet
another
strong
year,
according
to
UBS.
The
firm
lifted
its
year-end
target
on
the
S
&
P
500
from
4,850
to
5,150,
representing
7.7%
upside
for
the
benchmark
stock
index
from
Friday’s
close.
The
S
&
P
500
ended
last
week
at
4,783.83.
“Given
the
Fed’s
recent
pivot,
subsequent
decline
in
rate
expectations,
and
above-trend
2024
EPS
revisions,
we
now
embrace
this
upside
scenario
as
our
base
case,”
strategist
Jonathan
Golub
wrote
in
a
Tuesday
note.
This
year’s
more
dovish
Federal
Reserve
policy
supports
higher
valuations,
Golub
said,
upping
his
2024
earnings-per-share
estimate
on
the
S
&
P
500
by
$10
to
$235.
He
also
raised
his
EPS
estimate
for
the
following
year
by
$4
to
$250.
In
mid-December,
central
bankers
penciled
in
at
least
three
rate
cuts
in
2024,
assuming
quarter-percentage-point
increments.
Traders
think
the
Fed
will
be
even
more
aggressive,
pricing
in
seven
rate
cuts
this
year,
according
to
CME
Group’s
FedWatch
tool.
“While
earnings
should
drive
2024
returns,
falling
interest
rates
should
support
incrementally
higher
multiples,”
Golub
said,
adding
that
stronger
tech
earnings
should
offset
a
margin
drag
this
year.
In
addition
to
these
catalysts,
Golub
noted
that
the
broad
market
index
is
approaching
all-time
highs:
The
S
&
P
500
on
Friday
had
risen
above
4,800 for
the
first
time
in
more
than
two
years,
and
almost
beat
its
all-time
high
level
set
in
January
2022.
.SPX
mountain
2021-12-31
SPX
since
2022
The
strategist
added,
however,
that
although
the
index
is
up
more
than
24%
since
the
start
of
2023,
stock
prices
are
“relatively
flat”
over
the
past
two
years.
Earnings
estimates
are
10%
higher
while
price-to-earnings
ratios
are
10%
lower,
he
added.
Still,
Golub
noted
the
S
&
P
500
has
seen
a
leadership
rotation
in
recent
months
toward
cyclical
names
that
indicates
an
uptick
in
market
sentiment.
That’s
a
shift
from
last
year,
when
growth
names
were
the
favorite.
Technology
stocks
—
notably
the
“Magnificent
Seven”
batch
of
big-tech
names
that
each
posted
gains
of
at
least
49%
—
led
the
index’s
24%
rally
in
2023.
Cyclical
stocks,
which
include
more
discretionary
names
such
as
airlines
and
furniture
sellers,
tend
to
be
more
affected
by
systemic
macroeconomic
changes
and
are
the
most
sensitive
to
an
economic
recovery.
Recent
flows
into
cyclical
names
indicate
that
investors
think
the
market
may
have
avoided
a
deeper
recessionary
period.
“While
the
S
&
P
500
advanced
throughout
2023,
leadership
has
become
more
pro-cyclical
over
the
past
3
months,
an
indication
of
investor
optimism
toward
the
economy,”
Golub
said.
