Why 2024 Could Be a Massive Year for US Equities

The US stock market continued its 2023 momentum last month, resulting in the best November for the three major indexes since 2020. Led by the ongoing artificial intelligence (AI) craze, Bank of America (BofA) expects this uptrend to extend into 2024, with one of the bank’s tools projecting an S&P 500’s surge to 5,300 by the end of next year. 

Big Tech Accounted for Over 80% of S&P 500’s 2023 Gains

It’s safe to say that after a challenging 2022 marked by record-high inflation and rising interest rates, many anticipated a rebound in US stocks and other risk assets. However, the extent of the ensuing rally has surpassed many expectations.

As of December 1, 2023, the S&P 500 is 4,567, representing a year-to-date gain of 19.5%. The broader market index’s rally has been fueled by many factors: cooling inflation, less aggressive policy tightening by the Federal Reserve compared to 2022, and an incredibly resilient US economy. 

But the primary driver of this ascent has been the ongoing revolution in the technology sector led by generative artificial intelligence (AI) services, most notably ChatGPT. 

The impact of this boom has been so strong that the biggest seven stocks, also known as the Magnificent Seven, accounted for more than 80% of the S&P 500’s gains this year. On the flip side, the remaining 493 constituents of the index rose by a mere 4%, indicating extraordinary market concentration. 

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Bank of America’s S&P 500 Price Target for the End of 2024

The stock market’s remarkable momentum has been reflected across all three major indexes, not just the S&P 500. In particular, the Dow Jones Industrial Average (DJIA) rose about 8% in November, representing its biggest monthly gain since October 2022. Similarly, the Nasdaq Composite surged 10%, marking its best month since July 2022. 

As such, all three indexes recorded their strongest November since 2020.

This bullish market sentiment also made market analysts more optimistic. Notably, Bank of America’s Sell Side Indicator (SSI) – a tool that indicates how much the bank’s experts suggest investing in the stock market – soared to 53.6% last month. 

At this level, the indicator signals an expected price return of 15% for the next 12 months, which would boost the S&P 500 index to 5,300 by the end of 2024. Although the SSI is standing in “Neutral” territory, it is located much closer to a contrarian “Buy” signal than a “Sell.”

While the bank’s strategists acknowledged that the market environment is yet to be “dominated by high conviction and euphoria,” sentiment is not the sole reason “to have a constructive equity outlook.”

Compared to the SSI’s expected return, Bank of America’s official 2024-end price target for the S&P 500 is 5,000, implying a 9.5% growth from the current level. Meanwhile, not all Wall Street giants are bullish on the stock market’s prospects for the next year, with JPMorgan predicting a potential drop to as low as 4,200. 

Do you agree with bullish analysts’ views that the S&P 500 could rise as high as 5,000 next year? Let us know in the comments below.