Evercore ISI warns S&P 500 may move 'full circle' in 2024
Following a volatile 2023 year, Evercore ISI equity strategists reflect on a year marked by significant developments, including war, Generative AI advancements, inflation concerns, a banking crisis, and sentiment fluctuations.
Despite these momentous events, the S&P 500, the NDX, and the MSCI World Index find themselves near the levels where they concluded 2021, emphasizing the cyclic nature of market dynamics.
Evercore ISI strategists note the enduring influence of long-term earnings on stock performance. In the short term, valuations take the reins, evidenced by the S&P 500 experiencing a -19.4% change on an earnings per share (EPS) of $219.19 in 2022 and a +24.2% shift on an estimated EPS of $219.52 in 2023.
This juxtaposition encapsulates the market's journey «Full Circle,» the strategists write.
“Along with S&P 500 EPS ($221e for 2024), we expect the S&P 500 to move Full Circle in 2024, ending 2024 at 4,750. A “Full Circle” portfolio is tilted toward Defense – Comm. Svcs. Cons. Stap. and Health Care – which outperform from the Fed’s Last Hike to the First Cut,” the strategists said.
Despite this cyclical motion, Evercore ISI notes that one element yet to complete a full circle is the concept of money. The Federal Reserve has made strides in restoring the «Price of Money,» but the challenge lies in achieving a genuine «Soft Landing,» a feat accomplished only once in 1995.
“12/31/23 finds investors with a “Nothing can go wrong!” optimism on the Fed’s implicit “Soft Landing” promise,” the strategists added.
However, Evercore ISI warns that stocks may face challenges in discounting a mild midyear recession and are vulnerable to disappointment if a more persistent inflation trajectory results in fewer anticipated rate
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