According to the latest analysis from DataTrek Research, the US stock market may experience 'earnings momentum' in the next year, with the s&p 500 index reaching the target of 6000 points in 2024, especially after the Fed started a rate cut cycle last week.

According to FactSet's data, the s&p 500 index closed at 5718.57 points on Monday, setting a new historical record. Nicholas Colas, co-founder of DataTrek, pointed out in an email sent on Monday: "Contrary to some pessimistic views, what is driving s&p 500 profit growth is not just the technology and ai sectors. In the next year, multiple industries will contribute their efforts, possibly exceeding expectations."

According to DataTrek's data, Wall Street analysts predict a 15.2% increase in eps for the s&p 500 index next year, higher than this year's 10%. Colas cited FactSet data showing that next year's profit growth expectations are broad, particularly with strong performances in cyclic industries such as energy, materials, and industrials.

Colas also noted that with the Fed entering a "loose mode," even as the US economy continues to grow steadily, the stock market may continue to rise. In terms of corporate profit expectations, Wall Street analysts predict eps for the s&p 500 index to rise to $258 over the next four quarters, approximately a 12% increase from the past four quarters.

Meanwhile, the s&p 500 index currently has a pe ratio of 22.1 times, slightly higher than the five-year average of 19.5 times and the ten-year average of 18 times, but still lower than the peak of 23.2 times set in 2020. Colas summed up by saying: "The target of 6000 points for the s&p 500 index represents a price expectation of some kind of 'peak confidence,' based on optimistic yet achievable estimates of recent index earnings power."

After the Federal Reserve cut interest rates, the s&p 500 index hit a historical high.

On Monday, the S&P 500 index rose slightly, breaking through the previous historical high set on September 19th, which happened to be the second day of the Fed's announcement of a 50 basis point rate cut, marking the start of its interest rate reduction cycle.

John Madziyire, Senior Portfolio Manager of US Treasury and TIPS at Vanguard Group, said in a phone interview: "The probability of a soft landing has increased." He pointed out that the US economy is showing resilience, and inflation is easing amid a "tightening" monetary policy environment. Furthermore, he noted that the Federal Reserve is currently recalibrating the benchmark interest rate to a neutral level, which neither slows nor stimulates the economy.

Last week, the Federal Reserve lowered the target range for the benchmark interest rate to 4.75% to 5%. Madziyire believes that the so-called neutral interest rate may be close to 3%.

This year, interest rates in the bond market have declined, with yields on 10-year and 2-year US Treasury bonds falling this month and since the beginning of the year. On Monday, the yield on the 10-year US Treasury bond rose slightly to 3.74%, while the yield on the 2-year bond remained at 3.576%, data from the Dow Jones Market Data.

Colas stated that in the environment of corporate profit growth and declining interest rates, reaching 6000 points in the s&p 500 index "is not difficult", a 5.2% increase compared to last Friday's closing price.

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