Citigroup analysts expect the S&P 500 Index to continue rising in the second half of 2024, although at a slower pace than in the first half of the year.
The analysts noted that Nvidia and other "Magnificent Seven" companies "contributed most of this year's gains in the S&P 500 Index." Despite ongoing recession fears, they maintain a constructive stance on the fundamentals for the second half of the year.
In a report, the analysts stated, "Generative AI investment spending significantly offsets more traditional macro concerns." "Fundamentals for 2025 should continue to follow, although the current consensus for next year appears somewhat aggressive."
In the baseline scenario, Citigroup forecasts an end-of-year target of 5600 points for the S&P 500 Index in 2024. Comparatively, their bearish and bullish scenario targets are 4300 points and 6100 points, respectively. For 2025, Citigroup's baseline forecast is 5800 points, with a potential rise to 6400 points in a bullish scenario and a target of 4700 points in a bearish scenario.
Citigroup analysts noted that the "Magnificent Seven" stocks have risen more than 31% this year, contributing 8.7 points to the Index's 15.6% gain. Nevertheless, the other parts of the Index have performed strongly, consistent with their expectations at the beginning of the year.
By industry, the growth cluster, especially large-cap tech stocks, has led the performance. Cyclical and defensive stocks have also performed well year-to-date, although they have not kept pace with the growth cluster.
Looking ahead, Citigroup analysts expect earnings growth to expand across industries. They emphasized that accurately capturing the earnings trajectory of the largest contributors is "critical to the Index's earnings calculations."
