Bull vs. bear: Can the S&P 500 keep rising in 2024?

We review the bull and bear case for the S&P 500 this year.

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The S&P 500 Index (SP: .INX) is up 9.7% already this year after a spectacular 24% gain in 2023.

Last year's gain was triple the pace of the S&P/ASX 200 Index (ASX: XJO), which rose by 8.1%.

The Australian share market tends to follow US stocks in trend terms, so it is not surprising that both markets are up, but each market can move at a different pace, as the results show.

Both markets have recently hit record levels due to investor excitement over potential interest rate cuts later in the year.

But one big difference between the US markets and the ASX 200 is they are home to some of the world's most successful technology companies and many of them are shooting the lights out with earnings.

The Magnificent Seven, which includes Microsoft Corp, Apple Inc, and Amazon.com Inc, has generated much excitement among investors due to their outsized earnings growth.

NVIDIA Corp (NASDAQ: NVDA) is a case in point, with the company reporting an 'insane result' with a 769% net income increase in its latest quarterly update.  

But can all this growth continue for the S&P 500?

The S&P 500 bull: Wells Fargo

As reported in The Australian, Wells Fargo equity head Christopher Harvey is predicting this rally will continue.

He reckons the S&P 500 will be at 5,535 points by December. His previous forecast was 4,625 points. The index closed last night at 5,202.39 points.

Harvey has become more ambitious due to the explosive growth of artificial intelligence and better-than-expected company earnings.

In a note to investors (courtesy Bloomberg), Harvey said:

In our view, the bull market, AI's secular growth story, and index concentration have shifted investors' attention away from traditional valuation measures and toward longer-term growth and discounting metrics.

The latest US jobs report was surprisingly strong, leading some traders to reduce their expectations of rate cuts to just one or two this year. Some reckon the US Fed could even leave them as they are.

Ophir Asset Management is another broker expecting the rally to continue, despite some analysts now saying rate cuts may come later than initially expected, according to the Australian Financial Review (AFR).

Some analysts believe the US is in for a 'no landing' – when activity expands despite higher interest rates – instead of a 'soft landing' when the economy and inflation both slow.

Luke McMillan, head of research at Ophir, said US shares have risen seven times during periods where the economy experienced a soft landing and rate cuts with no immediate recession.

McMillan added:

And after last week's hot US jobs data report, there is increasing chatter of no landing and no rate cut.

Bottom line: markets like Fed cuts, so long as they are not emergency cuts to stave off a recession.

The S&P 500 bear: JPMorgan Chase

JPMorgan strategists have an end-of-year target of 4,200 points for the S&P 500.

Overnight chief executive Jamie Dimon said US interest rates could rise to 8% or higher over the coming years due to the cost of the green energy transition and the wars in Ukraine and Gaza.

In his annual letter to JPMorgan Chase shareholders overnight (courtesy Wall Street Journal), Dimon said:

Huge fiscal spending, the trillions needed each year for the green economy, the remilitarization of the world and the restructuring of global trade—all are inflationary.

Dimon said the US economy had remained resilient but geopolitical tensions were a threat to the world economy, so today's market optimism may be overdone.

He said:

These markets seem to be pricing in a 70 per cent to 80 per cent chance of a soft landing. I believe the odds are a lot lower than that.

Interested in US shares?

We recently canvassed a bunch of ASX ETFs that offer good exposure to US shares, ranging from simple index funds like iShares S&P 500 ETF (ASX: IVV) to strategic themed funds like VanEck Morningstar Wide Moat ETF (ASX: MOAT), which specialises in companies with big competitive advantages (i.e., moats).

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, JPMorgan Chase, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Nvidia, VanEck Morningstar Wide Moat ETF, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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