Since the beginning of this year, led by large technology stocks such as Nvidia, the US stock market has been extremely strong. As of the latest closing date, the S&P 500 index has risen by more than 15% and has set more than 30 historical highs so far this year; the Nasdaq index, which is dominated by technology stocks, has risen very strongly, accumulating nearly 19%.

Under the boom of the US stock market, Wall Street analysts have also raised their target prices for US stocks. Some institutions have shouted that the S&P 500 index will reach 6,000 points by the end of the year. Goldman Sachs has even revised its S&P year-end expectation three times, echoing some of Wall Street's most optimistic analysts.

Bullish on the US stock market! Major banks are bullish on the S&P with a high target of 6,000 points.

As the S&P 500 index continues to hit new highs, the Evercore ISI strategy team boldly predicts that the S&P will reach 6,000 points by the end of the year, becoming one of the most bullish teams on Wall Street.

Evercore stated that the background of slowing inflation, the Fed's intention to cut interest rates, and stable growth of corporate profits will support the US economy, and there is room for further growth in the future. Julian Emanuel, the chief equity and quantitative strategist of the bank, said that the S&P 500 index will jump to 6,000 points by the end of December, with EPS reaching $238, which will make the P/E ratio of the index rise to 25 times on a tracking basis. Although the P/E ratio will inevitably rise from a historical standard, it will still be lower than the peak of the Internet bubble period at 28 times. In addition, he also believes that the S&P 500 index will reach 7000 points by the end of 2025.

Goldman Sachs, Citigroup, UBS, and BMO Capital Markets followed closely, all of whom unanimously raised the target price for the S&P 500 to 5,600 points. Goldman Sachs strategy team pointed out that Microsoft, Nvidia, Google parent company Alphabet, Amazon, and Meta’s five stocks accounted for 25% of the market value of the index and contributed most of the gains of the index. The EPS of these technology giants increased by 84%, while the EPS of other 495 companies only increased by 5%. At the same time, investors’ enthusiasm for AI further pushed up the valuation. As profits continue to rise, Goldman Sachs’ valuation model shows that the P/E ratio of the S&P 500 index at the end of the year will be 20.4, which is 3% lower than the current P/E ratio of 21.1.

Citigroup strategist Scott Chronert stated that the rise in the stock prices of US technology giants may continue to push the S&P 500 to new highs. He raised his year-end target for the S&P 500 index from 5100 points to 5600 points and pointed out that the continuous strength of the seven US giants and market expectations for earnings growth of other S&P 500 component stocks will also expand. At the same time, Scott Chronert and his team also raised their expectations for the S&P 500 EPS for 2024 from $245 to $250, and raised their expectations for the S&P 500 EPS for 2025 to $270.

On the other hand, the Morgan Stanley strategist adheres to the consistent bearish principle. Chief market strategist Kolanovic predicts that the S&P 500 index will close at 4,200 points this year, indicating that the US stock market will fall more than 20% from its current level within the next six months.

Is the continuous surge of technology stocks triggering the market, or are there hidden concerns behind the noise?

Although the U.S. stock market is full of joy, there are also concerns. Data shows that the concentration of the U.S. stock market is at an extremely high level, showing a strong "herding" effect.

After Microsoft, Apple, and Nvidia's market values exceeded $3 trillion, the three companies accounted for more than 20% of the weight of the S&P 500 index; in addition, although the S&P 500 index continues to hit new highs, the main driving force is still several technology giants, only Apple, Nvidia, Microsoft, Alphabet and Amazon, the 5 companies, contributed 60% of the gain of the index. Once these technology giants begin to decline, the S&P 500 index will undoubtedly suffer a huge impact.

Wall Street guru Gary Shilling warns that US stocks may plunge 30%, and a recession may come within a few months. He pointed out that the current stock prices are very expensive, and the Shiller P/E ratio of the S&P 500 index is about 45% higher than the long-term average. In addition, he also mentioned the risk of future "debt bomb".

CFRA Research's Chief Investment Strategist Sam Stovall also issued a warning that the S&P 500 index is about to undergo a correction, possibly falling by 5%, due to the three factors of the Federal Reserve's interest rates, inflation, and stock valuations. Stovall pointed out that the valuations of large-cap technology stocks in the US stock market are too high. And in the future, US technology stocks may soon see the "first crack in the ice."

Only technology stocks have outperformed the US large-cap market. I think the US stock market is a large jet aircraft that relies solely on one engine to fly. Think about how long it can fly in the air.

In addition, Bank of America Merrill Lynch warns that the US stock market may have peaked, with the "red light" shining in 40% of the top ten indicators it observes. In the bank's database, the top ten indicators often appear before the US stock market peaks. As of May 2024, four indicators have been triggered. When the progress bar for the peak signal reaches 40% and the average reaches 70%, the bull market will peak. These top ten indicators cover aspects such as "optimism," "market valuation," "macroeconomics," and "credit tightening."

However, these dissenting voices have not disturbed the optimistic sentiment among the bulls. Goldman Sachs' analyst Peter Callahan said that the US stock market is not currently in an "overvalued" state, as the P/E ratio of the top ten market-cap stocks in the S&P 500 is about 30 times, compared to 47 times during the peak of the dot-com bubble in 2000. If the top ten stocks are excluded, the overall P/E ratio of the S&P 500 index is only 18 times. Therefore, as long as the US stock market continues to rise, there is still potential for the S&P 500 to continue its uptrend.

Mooers, do you think the current valuations of the US stock market are expensive?

What will be the trend for the US stock market in the second half of this year?

Can the crazy rise of tech giants continue?

Let's discuss in the comments section!

Editor/Emily