① RBC stated that the S&P 500 index will close at 5000 points next year; ② Strong investor sentiment will drive the index to a new high; ③ Analysts said that although the yield of treasury bond bonds is still high, it will not threaten the attractiveness of the stock market.
As market expectations for the Federal Reserve's interest rate cut next year become stronger, the global investment bank RBC Capital Markets has also joined the bullish team for the US stock market, predicting that the S&P 500 index will reach a historic high next year.
RBC analysts predict in their latest report that the S&P 500 index will close at 5000 points in 2024, up about 10% from last Friday's close.
The analyst wrote, "Although the rebound in November (the S&P 500 index rose more than 10% from its low on October 27th) may have driven some gains in 2024, we remain optimistic about the S&P 500 index's performance over the next year."
The Royal Bank of Canada's forecast, like other Wall Street bulls, is that the S&P 500 index will rise significantly next year. Last Tuesday, Bank of America also predicted that the index would hit 5000 points, in line with the year-end target set by Phil Orlando, Chief Market Strategist at Federated Hermes.
For Royal Bank of Canada, its outlook forecast is based on five models, namely market sentiment, valuation and profitability, economy, politics, and the dynamics between stocks and bonds.
In the above report, analysts referred to market sentiment as the "strongest driving force guiding the US stock market in 2023.". RBC also pointed out that stock valuations may be higher than many investors are currently aware of.
They wrote, "Our valuation model implies the view that sustained mild inflation can bear most of the heavy work supporting the P/E ratio. Our analysis suggests that this situation occurred as early as the 1970s. This model is our most constructive prediction for 2023, and if Santa Claus appears in December, it is likely to be the most accurate in the end."
Meanwhile, bond yields have declined since late October, but are still higher than earlier this year. However, RBC analysts say that high returns in the bond market may reduce the attractiveness of stocks, which is not a problem for the stock market: as a lesson from history, most of the time the stock market still tends to steadily rise.
Finally, RBC pointed out that if there is any uncertainty in the year that could threaten the momentum of the stock market, it is the US presidential election. The bank stated, "In presidential election years, the S&P 500 index rose an average of around 7.5%. This is lower than the usual increase for the index."
"This statistical data tells us that any presidential election year is a source of uncertainty in the US stock market," the report added.