Societe Generale strategists are anticipating a positive trajectory for the U.S. S&P 500 index for the remainder of 2023, fueled by an increasingly optimistic economic landscape. However, the same experts have unveiled more restrained projections for stock returns as they peer into the horizon of 2024.
On Tuesday, Societe Generale revised its year-end price target for the S&P 500, elevating it from 4,300 to 4,750 for 2023. This updated target stands approximately 6% above the closing level observed on Monday but falls just shy of the index’s historical record high recorded in January 2022.
In a recent report, the SocGen equity strategists expressed their belief that discussions about an impending recession will be “deleted/delayed” in the forthcoming months, affirming their bullish stance in the near term.
Furthermore, the strategists identified additional support for the S&P 500 stemming from investments driven by artificial intelligence (AI). They also highlighted the attractiveness of the U.S. benchmark index in comparison to numerous other international equity markets, citing “stagflation in Europe and a disinflationary downturn in China.”
Year to date, the S&P 500 has displayed robust growth, surging by approximately 16.5% in 2023. This stands in contrast to the 7% rise observed in Europe’s STOXX 600, the 2% gain registered by MSCI’s emerging markets index, and the 25% surge witnessed in Japan’s Nikkei.
The SocGen strategists affirmed their belief that the S&P 500 will prove resilient, describing it as the “last man standing” in terms of safeguarding its returns.
However, the firm’s economists continue to contemplate the likelihood of a U.S. recession as the “core scenario,” albeit with a delayed timeline. For the second quarter of the following year, Societe Generale has set an S&P 500 target of 3,800, anticipating a potential “shock” to the index, possibly driven by a contraction in U.S. consumer spending.
The firm’s long-term projection envisions the index recovering by the fourth quarter of 2024, ultimately reaching the same target as the year-end 2023 figure of 4,750.
Among the risk factors outlined by Societe Generale is the potential scenario where the 10-year U.S. Treasury yield surges to 5% or beyond, an increase from its current level of around 4.3%. Such a surge in yields, according to the strategists, could exert downward pressure on the S&P 500, potentially pushing it back to the 4,000 mark.
