Could the S&P 500 fly as high as 5,500 in 2024?

Brad Smith · Host

Mon, Dec 18, 2023, 7:48 AM

In This Article:

Market strategists have collectively gone bullish on the S&P 500 (^GSPC) in 2024, forecasting upwards of 5,000 points by next year's end. But is it still too early to be this bullish?

Infrastructure Capital Advisors CEO Jay Hatfield anticipates the S&P to reach as high as 5,500 points by the end of 2024, joining Yahoo Finance Live to discuss Europe's economic situation and what factors are going into these US market calls.

"It is really based on an optimistic work on interest rates, but that has been unfolding," Hatfield says on rate cuts expected by the Federal Reserve. "Like I said, now it's actually consensus that we'll have cuts."

For more expert insight and the latest market action, follow along with Yahoo Finance’s 2024 Investor Guide this week. You can also watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

This post was written by Luke Carberry Mogan.

Video Transcript

[MUSIC PLAYING] BRAD SMITH: Wall Street bulls are charging into the new year.

Signs of a soft landing for the US economy have pushed the S&P 500 index up nearly 23% this year, with more strategists optimistic over the Federal Reserve's dovish forecast on interest rates next year.

But is it too early to be this bullish?

Our next guest doesn't think so.

He sees the S&P hitting a new high at 5,500 by year end 2024.

Joining us to break down the market outlook in the year ahead, we've got here on set with us Jay Hatfield, Infrastructure Capital advisor CEO, and Yahoo Finance's reporter Madison Mills also joining as part of Yahoo Finance's 2024 Investor Guide.

Jay, great to have you here on set with us.

First and foremost, what is the biggest risk to your outlook here?

JAY HATFIELD: Thanks, Brad and Seana, for having me on in studio.

Well, if you really track back to what our non-consensus call was, we also-- we had a 4,500 target, which is actually more bold than our 5,500 relative to what all the other strategists are at, and really focuses on Europe.

Most of US investors, rightly so, for equities don't focus on Europe, but we're fixed income investors primarily, and Europe is in a recession.

They have a GDP now, which you can access on the web, they're tracking negative 1.6%.

This quarter, they were negative 0.1-- I mean, 0.4 really if you annualize it last quarter.

And so we think the ECB is going to be forced to cut first, which will give the US Federal Reserve cover.

And in fact, if you look at the futures market globally, every OECD country is projected by the futures market, not us, to cut rates by an average of over 150 basis points.

So it's really more of a global focus because I am nervous.

You know, you saw some Fed officials about the Fed.

They are still in their Phillips Curve mentality that we have to have a recession to eliminate inflation.

But that's really the heart.

So I would urge your viewers to focus on Europe and see when the ECB cuts because they're probably going to be first.

SEANA SMITH: Hey, Jay.

I wanted to bring up the whole aspect of rate cuts and how much of your call really hinges on that because like you just alluded to, we heard from Austan Goolsbee, who was out making comments over the weekend just saying that it is still too early to really call a victory here in the fight to tame inflation just a little bit.

What are you forecasting in terms of that more aggressive outlook that you have for next year?

I know a lot of it depends on what we see internationally, but how much of that I guess is factored in terms of Fed rate cuts and what exactly that looks like?

JAY HATFIELD: Well, that's a spectacular question because you should never quote multiples without talking about interest rates.

So we have a discounted cash flow multiple, and so roughly every 25 basis points is a full S&P multiple.

So we're forecasting 3.5% on the US 10-year.

So what's great about our simple model is, you can say, oh, I don't believe that.

I think it's going to be 4.

Well, then you take two multiple points out, which is roughly 500 points.

So you could get down below actually those targets you just put up there.

So it is really based on an optimistic view on interest rates, but that has been unfolding.

And like I said, now it's actually consensus we're going to have cuts.

It's not two months ago, we were saying Europe was going in recession and there were no expectations, now it's really globally.

So if that unfolds, then our case is likely.

And I would say the risk is to the upside on our case because of a potential AI overvaluation.

So you could get 21, 22, 23 times, assuming rates are-- or in fact, rates could go to 3 even if we do have global rate cuts.

and

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