Analysts at BMO Capital raised their price target for the bonds in a note earlier this month, while UBS did the same this week, with both now seeing the index hit 5,600, representing Street highs.
BMO Capital told investors that the S&P 500’s momentum is likely to continue. The firm acknowledged that it had previously underestimated the strength of market momentum, especially as investor expectations and Fed policy guidance were essentially aligned compared with the wide gap that existed at the start of the year.
“In addition, historical performance figures suggest continued growth given year-to-date performance levels,” BMO said. “And while we still expect a larger pullback to occur at some point, it will likely occur at a much higher level than we previously expected, meaning the eventual rebound will also start from a higher base.” .
Overall, the company believes the market will behave as it did in 2021 and 2023. Those were years when BMO “underplayed the strength of market momentum,” something they’re trying to avoid this time.
Meanwhile, UBS raised its target to 5,600 based on better-than-expected earnings. “At the end of the first quarter, before earnings season began, consensus estimates were for earnings per share growth of 4.1%. In contrast, it now appears that growth will end at 10.6%,” the bank said.
UBS also noted that second-quarter estimates were also fairly robust, while a similar pattern was evident in full-year 2024 estimates. “All of these trends support further market growth,” UBS writes.