Societe Generale Predicts S&P 500 to Rally Another 4.6% as Profit Growth Thrives
In a bold move, Societe Generale has raised their S&P 500 target to a street-high of 5,500, predicting a 4.6% rally for the benchmark index by the end of the year. This optimistic outlook is fueled by the thriving profit growth in large-cap stocks, driven by what the bank calls “US exceptionalism.”
According to strategist Manish Kabra, the unique drivers of the US stock market have been propelling it ahead of its peers for decades, and this trend is expected to continue. Three key macroeconomic themes are currently supporting this narrative: the reshoring boom, the AI boom, and the improvement in US financials.
Despite the widespread market optimism, Societe Generale views this rally as rational, given the continuous increase in profit growth and the setting of new records for the S&P 500. Kabra acknowledges that the significant gains seen earlier in the year may not be repeated in the short term, but the overall outlook remains positive.
Looking ahead, the biggest downside risk identified by Societe Generale is the possibility of the Fed hiking rates again. However, the bank expects the central bank to cut rates three times this year, in line with the Fed’s communicated message.
On the flip side, the upside risk is a potential bubble formation in the market. Kabra notes that for the S&P 500 to reach the levels of a dot-com-bubble exuberance, it would need to rise an additional 20%.
With this bullish forecast from Societe Generale, investors will be closely watching the performance of the S&P 500 in the coming months to see if the predicted rally comes to fruition.
