Citi Says the S&P 500 Could Reach 5,100 by 2024 if the U.S Stock Market Rally Broadens

Citigroup's equity analysts foresee a potential climb in the S&P 500 index to 5,100 by the end of the next year, marking an extension of the ongoing rally in the U.S. stock market. In a recent research note led by Scott Chronert, the analysts at Citigroup attribute their price target for the close of 2024 to an estimated increase in the S&P 500's earnings per share, projecting it to reach $245. However, they have adjusted their midyear 2024 target from 5,000 to 4,800.

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Despite the Federal Reserve's efforts to tighten monetary policy and address inflation concerns, the U.S. stock market has experienced a robust rally in the fourth quarter. As of the latest data from FactSet, the S&P 500 closed at approximately 4,604, registering nearly a 20% gain throughout the year. The resilient performance of the market aligns with the backdrop of a strong economy.

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The analysts at Citi Research express a positive outlook on U.S. equities, emphasizing improving earnings growth, even in the face of lingering recession risks. They anticipate a broadening of market dynamics beyond the dominance of Mega Cap Growth in 2023, foreseeing a shift accompanied by accelerated index earnings growth across various sectors and a greater number of individual stocks contributing positively.

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Acknowledging the potential for a slowing economy in the first half of the next year, Citigroup lowered its midyear 2024 target to 4,800. However, their year-end target for 2024 assumes the resolution of recessionary concerns, an evolution in Federal Reserve policy, above-consensus earnings growth, and a price-to-earnings multiple not significantly deviating from current levels.

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The current price-to-earnings ratio for the S&P 500 stands at 20.7, as indicated in the note from Citigroup. However, predictions regarding the S&P 500's performance at the end of 2024 vary across Wall Street, with market strategists having divergent views on whether the index will surpass or fall below the 5,000 mark.

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According to a report by FactSet senior earnings analyst John Butters, as of December 7, the bottom-up target price for the S&P 500 was 5,068.41, reflecting a 10.5% increase from the closing price of 4,585.59. The disparity in forecasts underscores the uncertainty and differing perspectives in the financial industry.

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Despite these varied predictions, the U.S. stock market closed higher on the discussed Friday, driven in part by positive investor sentiment following a job growth report for November that exceeded expectations. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite each posted a 0.4% gain, contributing to the S&P 500's sixth consecutive weekly rise, marking its longest winning streak since November 15, 2019, according to Dow Jones Market Data.