The S&P 500 will rally another 5% this year as profit growth thrives, new biggest Wall Street bull SocGen says
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- The S&P 500 will rally another 4.6% this year as profit growth thrives, Societe Generale said, rising their target to a street-high of 5,500.
- "US exceptionalism" is helping to drive profit growth in more and more large-cap stocks.
- "Despite widespread market optimism, we view this as rational rather than excessive, as profit growth continues to increase and set new records for the S&P 500."
Societe Generale has claimed the crown of the new biggest bull on Wall Street. In a note on Thursday, the bank raised their S&P 500 target from 4,750 to 5,500 — the highest forecast out there.
That means a 4.6% additional upside to benchmark index, which is currently trading at 5,260.
The reason? A solid macroeconomic story, and robust profit growth.
"US exceptionalism is going from strength to strength," strategist Manish Kabra wrote.
That exceptionalism — the unique drivers of the US stock market that has kept it ahead of its peers for the last four decades — is expected to continue to drive profits in more and more large cap stocks.
There are three macroeconomic themes that are continuing to back that story right now, Kabra said. First is the "reshoring boom," which has encouraged more domestic production and led to a "re-industrialization" of the US. Then there's the AI boom, without which the S&P 500 would be at around 4,400, he said. And more recently, Societe Generale is optimistic about US financials as credit conditions and lending standards improve.
"Despite widespread market optimism, we view this as rational rather than excessive, as profit growth continues to increase and set new records for the S&P 500," Kabra wrote.
The 4.6% upside does mean that the golden returns of the year could be in the rearview mirror, he added. The S&P 500 has already rallied about 8% in 2024, and those gains are unlikely to repeat in the short term.
From here on out, the biggest downside risk to the market is the Fed hiking rates again. For now, Societe Generale expects the central bank to cut 3 times this year, in line with the Fed's message.
The upside risk is a full-on bubble formation. Kabra said that the S&P 500 would have to rise an extra 20% to price in any kind of dot-com-bubble exuberance.