Excessive profits to alter into leverage for S&P500– Societe Generale

Analysts at Societe Generale assign a query to profits – the glue that holds the S&P 500 Index collectively – to attain unusual highs in 2H24.

S&P500 is at a severe juncture

“After a +15% rally in the index yr to this level, we assign a query to the S&P 500 to preserve in bewitch-the-dip mode, with the next upleg coming nearer to a Fed price-cutting cycle, which we observe starting in early 2025e. Our S&P 500 target stage is unchanged at 5,500 for yr-kill 2024.”

“The outperformance of mega caps vs the authorized S&P 500 stock is now at a severe juncture. Narrow breadth ceaselessly occurs in a undergo market or when a few concentrated shares maintain the aptitude to exercise us into a ‘bubble’ – neither of which is our defective case. We observe cyclical alternatives exterior Tech too.”

“The AI ‘enhance’ turns into a TMT-relish bubble, driving the S&P 500 to 6,666 or 24.7x $270 (the March 2000 top valuation x our 2025 S&P 500 EPS estimate). Oil prices head in direction of $60bbl on the assist of unparalleled OPEC spare capacity. These two provide some upside risks.”

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