UBS Joins Wall Street Strategists Calling for a New S&P 500 Record This 2024

A group of strategists within UBS Group's wealth-management division has revised their 2024 price target for the S&P 500, aligning with a growing sentiment on Wall Street that foresees stocks reaching unprecedented levels by the year's end.

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Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, announced the team's increased confidence in their fundamental scenario of an economic soft landing. They anticipate the Federal Reserve making four interest rate cuts in 2024, with the initial cut likely occurring in May. Haefele stated, "We have raised our December S&P 500 target to 5,000, providing 6.4% upside from Friday’s closing price of 4,697," marking an approximate gain of 6.5% from the previous Friday's close. The S&P 500 had experienced a remarkable 24% surge in 2023, concluding on December 29 just 0.6% below its record close of 4,796.56 from January 3, 2022.

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The decision to revise their target was influenced, in part, by the employment report released on Friday. Despite revealing the addition of over 200,000 jobs in December, the data saw revisions lowering the numbers from the preceding two months by 71,000. Additionally, while average hourly earnings surpassed expectations, the data indicated a decline in the average number of hours worked, fostering the belief that increasing wages would not contribute to a resurgence of inflationary pressures.

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The UBS team anticipates a further reduction in wage growth, citing data from the previous week, which revealed a drop in the percentage of workers quitting their jobs to 2.2% in November, based on the JOLTS survey, below its pre-pandemic level. This decline may imply a diminishing confidence among workers in their ability to secure higher-paying roles.

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With unemployment still below 4%, UBS projects sustained strong consumption. Despite economists expecting the unemployment rate to rise to 3.8% in December, it remained steady at 3.7%. This stability is a crucial factor in UBS's economic calculations. Haefele and his team stated, "We still expect a moderate rise in the jobless rate in 2024, but we don’t expect an increased fear of unemployment to cause a sharp rise in rainy-day savings and a correspondingly sharp reduction in household consumption."

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Despite the positive headline regarding job creation, the UBS team perceives a trend toward gradual cooling, explaining the initial negative market reactions on Friday that were later reversed in both bond and equity markets.

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The team advises UBS clients holding a substantial amount of their portfolio in cash to act swiftly, recommending investment in long-dated bonds with attractive yields relative to recent history. Furthermore, the UBS team favors sectors of the stock market likely to outperform during a period of tepid economic growth. They suggest investors focus on quality stocks, emphasizing companies with strong balance sheets and a track record of delivering earnings growth.

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U.S. stocks experienced a decline last week, breaking a nine-week winning streak, the S&P 500's longest in nearly 20 years, according to Dow Jones Market Data. Analysts attribute the stock pullback during the first trading week of 2024 to various factors.

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On Monday, U.S. stocks displayed mixed performance, with the S&P 500 at 4,704, up by 0.2%, and the Nasdaq Composite at 14,620, up by 0.7%. The Dow Jones Industrial Average, however, declined by 186 points to 37,282, with shares of Boeing Co. slumping and exerting downward pressure on the blue-chip gauge.