Investing.com -- BMO Capital raised its S&P 500 price target to a new consensus high of 6,100 in a note this week, marking a 9% increase from its previous estimate of 5,600.
Despite a rocky start to September, when the index shed more than 4%, recent gains have nearly erased those losses. BMO Capital is optimistic that the market will finish the year higher, even if it retests recent lows.
“We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” BMO analysts noted.
Their revised target now represents the highest 2024 forecast for strategists tracked by Bloomberg.
BMO cited historical patterns, noting that years with strong gains through Q3 typically see stronger-than-average fourth quarters. In the eight years since 1950 when the S&P 500 gained between 15% and 20% through the first three quarters, the average fourth-quarter return was 6%, about 50% higher than the average for all years.
Another key factor supporting BMO’s bullish stance is the broadening market participation.
They explained that earlier in the year, gains were driven largely by the Mag-X stocks (big tech names like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL)), but in recent months, the rest of the index has shown "vastly improved trends."
The firm believes the broader participation should support continued market gains even if the performance of big tech decelerates.
BMO’s revised target implies a P/E ratio of 24.4x, which may seem elevated compared to historical norms.
However, BMO believes the current market environment is similar to the mid-1990s when the index maintained a higher-than-20x multiple for several years.
With strong macro and fundamental underpinnings, BMO Capital expects the S&P 500 to continue its upward momentum into the end of the year.