As a result of its latest rally that propelled it to new record highs, the S&P 500 came just 1% away from BMO Capital Markets’ year-end price target of 5,100. Despite this, the brokerage firm has chosen to wait before revising its projections.
“Obviously, we are starting to receive client questions regarding our target stance and especially since a few of our strategist counterparts have recently increased their targets,” analysts at BMO Capital Markets said in a Tuesday note.
However, the broker chooses to maintain its non-reactive approach to decision-making. For that reason, BMO said it remains “comfortable" with its current target and prefers to remain patient "unless incoming data suggest a change in our base case assumptions is warranted, which at this point it has not, in our view,” said the analysts.
The broker also thinks that the virtually uninterrupted rally from the October 2023 low and high valuation levels call for caution in the short term, especially when taking historical patterns into account.
Fortunately, the somewhat surprising robustness and resilience in corporate earnings should support stock prices, a trend BMO anticipates will persist over the year, aligning with its EPS forecast of $250, which stands above the consensus.
“Therefore, we would advise investors to not be too concerned should the market encounter some weakness in the coming months, as we expect, and instead treat any such periods as an opportunity to increase exposure to favored positions within portfolios,” the analysts at BMO Capital Markets said.