Christmas is in two weeks. This year's Santa Claus rally started early, i.e., on October 27. Will it last through Christmas? Will the rally continue through the end of this year, and maybe through the end of 2024 or even 2025? We think so.
In our November 3, 2022 Morning Briefing, we wrote that “we think the S&P 500 bottomed on October 12 and see a few potentially uplifting developments to come.” On January 9, 2023, we predicted: “The S&P 500 will move higher during the first half of the year, rising to 4500 and then stall there until a year-end rally drives it up to a new record high of 4800 in anticipation of higher earnings in 2024.”
Along the way, we trimmed our year-end target to 4600. On July 19, we wrote: "The S&P 500 is now almost at 4600 [well ahead of schedule]. It closed at 4556.27 on Tuesday. Rather than raise our year-end target, we are raising our expectations for what the bull market could deliver through the end of 2024 and beyond. We think that 5400 is achievable by the end of next year. If that happens, then 5800 would be our target for the end of 2025. In other words, we think that the bull market has staying power." (By the way, in our November 1, 2023 QuickTakes, we wrote: "It's possible that the S&P 500 bottomed today.")
We are now raising our yearend 2025 target to 6000 assuming 2026 earnings at $300 per share and a forward P/E of 20. That's because we are seeing more reasons to believe in our Roaring 2020s scenario.
On Friday, the S&P 500 closed at 4604.37 (chart).
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