Morgan Stanley forecasts that the S&P 500 will have little growth in 2024

Morgan Stanley projects that the Japanese equity market will do better in 2024 as a result of reflation and rising ROE, both of which are viewed as long-term advantages.

However, their strategists warn that growth in Europe and emerging markets might be disappointing. Regarding the United States, the financial behemoth predicts that earnings will rise again, with a low point in early 2024 and a subsequent rise.

The S&P 500 is expected to close the year at 4,500, according to Morgan Stanley strategists, which represents a mere 2% increase over current levels.

"We project a 17.0x P/E multiple on 12-month forward EPS (2025) of $266 for December 2024, translating into a 4,500 price target in about 12 months. The analysts wrote, "We project 2024 earnings of $229 (+7%Y), which assumes 4-5%Y topline growth in addition to modest margin expansion as labour cost pressures ease."

"We observe that stock-specific risk is still high, which is positive for a stock-picking atmosphere and suggests that there are better opportunities hidden beneath the market's surface, where valuations are more attractive than they are at the cap-weighted index level."

Although the medium-term outlook for earnings is positive, there are obstacles in the way of the near-term outlook. The analysts pointed out that the leading indicator of earnings revisions breadth has dropped to its lowest point since March.

Cautionary corporate commentary, frequently centred on macroeconomic factors, lends support to this trend. Growing cyclical and geopolitical risks have caused key indicators like the Conference Board Consumer Confidence Index and the ISM PMIs to decline recently.

Long-term 'higher for longer' interest rate trends are having an increasingly negative effect on consumer and corporate sentiment.

(Sources: investing.com, reuters.com)