Market Analysis

Deutsche Bank has increased its year-end target for the S&P 500 index to 5,750 points, up from 5,500, driven by a combination of rising stock buybacks, strong corporate earnings, and robust inflows, fueled by a strong risk appetite.

In a note dated September 12, Deutsche Bank strategists highlighted that S&P 500 earnings growth is expected to remain solid in the low double digits, consistent with growth rates outside of recessions.

The revised target suggests a 2.75% potential increase from the S&P 500’s recent close of 5,595.76 on Thursday.

The index has been buoyed by expectations of U.S. interest rate cuts this year and excitement around artificial intelligence (AI). This has led many brokerages to raise their annual targets for the benchmark, with some forecasting it could reach as high as 6,000 by the end of 2024.

Earlier in May, Deutsche Bank had adjusted its year-end target to 5,500, relying on strong corporate earnings to sustain equity valuations.

The brokerage noted that a recent August stock pullback, triggered by concerns over a weakening labor market and a de-rating of technology stocks, appears to be over, with positioning realigning with earnings growth.

Concerns about a cooling labor market have eased, as August payroll growth remained steady for the year.

Factors expected to support the market include a shift from "de-stocking" to "re-stocking," an increase in capital expenditures outside the technology sector, a broader manufacturing recovery, and a rise in consumer confidence. According to strategists led by Binky Chadha, Deutsche Bank's chief U.S. equity and global strategist, share buybacks are anticipated to reach approximately $1.2 trillion next year, up from the current $1 trillion, aligning with earnings growth.

Recent equity inflows have been strong over the past four months, surpassing typical seasonal trends and enhancing corporate earnings and equity returns.

Deutsche Bank also maintained its earnings per share (EPS) forecast for S&P 500 companies at $258 for 2024 and $285 for 2025.

Paraphrasing text from "Reuters" all rights reserved by the original author.