Analysts at Barclays have raised their price target for the S&P 500 in 2024 as the US economy continues to defy rate headwinds.
The bank revealed it now sees the S&P 500 reaching 5300 in 2024, up from its previous estimate of 4800. The new target is based on its recent sum-of-the-parts valuation framework.
"This reflects our view that inflation will continue to normalize while the economy remains relatively resilient and that Big Tech will maintain leadership in NTM earnings growth, resulting in 22.5x our revised base case FY24 S&P 500 EPS estimate of $235," Barclays explained.
The bank believes "Big Tech earnings exceptionalism" justifies a premium multiple for the group, while they see SPX excluding Tech, trading roughly in line with fair value amid easing inflation headwinds and a shallower reset to economic growth.
The firm's bull and bear case scenarios primarily revolve around big tech, which they believe has a growing influence on the US equity market as a whole.
"If the Big Tech extends its beat-and-raise streak and we assume ex-Tech negative revisions have bottomed, we could see the S&P 500 going to 6050 on $252 EPS," added Barclays. "On the other hand, if Big Tech begins to fall short of the ever-higher bar being set for its quarterly earnings while the macro backdrop softens unexpectedly, we could see the index falling to 4500 on $221 EPS."
Even so, Barclays feels the risk/reward is tilted toward the bull case, as macro data suggests the odds of an economic re-acceleration are beginning to outweigh the probability of even a mild recession.