Barclays equity strategists raised the 2024-end price target on S&P 500 by 300 points to 4800, reflecting an increased FY24 earnings estimate to $233 (up from $223).
Still, the updated model for the S&P 500 2024 EPS trails consensus by $13.
“Street consensus for double-digit EPS growth in FY24 looks overly optimistic even after upgrading our goods spending assumption; we see downside driven by disinflation, weak IP and slowing ex-US growth,” the analysts said in a report on Tuesday.
Barclays anticipates single-digit returns for U.S. equities next year, balancing easing inflation with modest economic deceleration. The analysts added that the positioning leaves room for further upside, but they are worried that stocks are “moving too far, too fast.”
“The surge in institutional flows could push equities over their skis, essentially "borrowing" 2024 returns and leaving less room for upside next year.”
The broker’s preference is for Big Tech and Discretionary sectors, large-cap over small, and a focus on Value and Quality over Growth.
“We expect Big Tech to be the primary driver of SPX earnings growth in FY24, underpinned by secular growth drivers, an incrementally stronger IT spending environment, and expanding adoption of AI technology. The consumer enters 2024 with strong household balance sheets that should support Discretionary spending; the sector also remains under-owned,” the strategists further noted.
The S&P 500 ended Monday at 4,550.43.