- The stock market will jump 12% in 2024, even if a recession materializes, according to BMO's Brian Belski.
- Belski said falling inflation, falling interest rates, and a strong jobs market will act as tailwinds for stock prices.
- Belski set a 2024 year-end S&P 500 price target of 5,100 based on earnings per share of $250.
The stock market will deliver another year of solid gains in 2024 as the second year of the bull market gets underway, even if an economic recession materializes.
That's according to BMO chief investment strategist Brian Belski, who set a 2024 year-end S&P 500 price target of 5,100, representing potential upside of 12% from current levels.
Falling inflation, falling interest rates, a strong job market and rising corporate earnings are tailwinds that will drive further upside in the stock market next year, according to Belski.
"US stock market performance and fundamentals in 2023 followed the script in our view to lay the foundation for what we continue to believe will be a path of normalcy for earnings growth, valuation trends, and price performance that is likely to unfold over the next three to five years," Belski said in a Monday note.
Belski expects a rather "normal and typical" year for the stock market in 2024, as gains are likely to be more evenly distributed across size and sectors, suggesting that it won't be mega-cap tech stocks driving the bulk of the gains like they did this year.
And the bears will also have a lot to chew on next year, meaning that the path to gains will be filled with doubt among the investment community.
"Unfortunately, bearish fear sells, and bulls are routinely doubted and panned. So, get ready for another year of analysis paralysis of US Federal Reserve policy, the impacts of the unflattening of the yield curve, unemployment drifting higher, and of course the 'Chicken Little recession' and its market impact that has been apparently just around the corner for the past few years and counting," Belski said.
Belski expects a very mild recession "in name only" to materialize next year, and if the economy once again avoids a contraction, it could send the S&P 500 even higher, to about 5,500 in his bull case scenario.
"We will continue to take our cue from labor market trends and unless they take a sharp turn for the worse, we are simply not concerned about the recession debate at this point," Belski said.
Belski derived his 2024 S&P 500 price target by assigning a 20.4x multiple to earnings estimates of $250 per share.
"Earnings growth picks up the slack for market returns with a more normal calendar year return," Belski said.
As to which individual sectors investors should own, Belski rated information technology and financials as overweights. Meanwhile, Belski said investors should avoid stocks found in the energy, materials, and consumer staples sectors.