With the Federal Reserve's interest rate cut cycle increasing the possibility of a soft landing for the US economy, Wall Street's optimism towards US stocks is growing, and analysts are predicting that the S&P 500 index will break through the 6000 point mark.
Stuart Kaiser, head of US stock trading strategy at Citigroup, said in a media interview on Tuesday that this bullish sentiment makes sense.
I think the most optimistic scenario for the whole year is that the US economy can avoid a recession and the Federal Reserve will implement an insurance style interest rate cut, right? Now this is a reasonable scenario, "Kaiser said.
He predicted that if the above conditions (economic avoidance of recession and Fed interest rate cuts) are met, the US stock market may rise another 5% to 10% by the end of this year.
So far, half of the above conditions have been met. Last week, the Federal Reserve finally began its interest rate cutting cycle, significantly lowering the federal funds rate by 50 basis points in order to prevent future economic downturns.
This "insurance style" interest rate cut has been welcomed by stock market investors, and the US stock market has repeatedly hit new highs since then. Kaiser stated that as long as an economic recession does not occur, the stock market's upward trend will continue.
However, he also pointed out that although the Federal Reserve emphasized at its recent policy meeting that a recession is not expected to come soon, all of this depends on the upcoming employment market data.
Since August, the continuously declining job market has been a core driving factor for concerns about economic slowdown. Investors need to see good employment data in the upcoming monthly data release, otherwise the prospect of an economic recession may become increasingly untenable.
Kaiser warns that an economic recession could easily overturn any efforts by the Federal Reserve to support the market.
Some other major banks are also closely monitoring US employment data.
According to Morgan Stanley, if the US unemployment rate drops below 4.1% and the number of non farm workers exceeds 150000, investors can celebrate. For the market, this will be the best situation as the stock market will maintain its upward momentum. If the unemployment rate rises above 4.3% and the number of non farm employees drops below 100000, investors should be prepared for the worst.
The call for 6000 points is gradually increasing
On Tuesday Eastern Time, the three major US stock indices collectively closed higher, with the S&P 500 index and Dow Jones Industrial Average hitting historic highs during trading and closing at historic highs. As of the close, the S&P 500 index rose 0.25% to 5732.93 points.
If Kaiser's prediction comes true, the S&P 500 index will rise above 6000 points by the end of the year.
At present, the call on Wall Street for the S&P 500 index to break through 6000 points is increasing day by day. Goldman Sachs' Chief US Equity Strategist David Kostin also predicted on Tuesday that once the dust settles on the US presidential election, US stocks are expected to continue rising, and the S&P 500 index will be around 6000 points in a year.
Ari Wald, Managing Director and Technical Analyst of Oppenheimer Asset Management, a veteran asset management firm in the United States, recently stated that there is almost no sign that the US stock market is about to peak, and the record breaking rise in the stock market will continue. Wald's target price for the S&P 500 index in the first half of 2025 is 6000 points.