Sept 13 (Askume) – Deutsche Bank raised its year-end target for the benchmark S&P 500 (.SPX) index to 5,750 points from 5,500 . The bank raised its target, citing rising share buybacks, strong corporate profits and robust investment flows.
“We believe S&P 500 earnings growth remains strong in the low double digits, in line with typical growth rates outside of a recession,” Deutsche Bank strategists said in a Sept. 12 report.
The new target is 2.75% higher than Thursday’s S&P closing price of 5,595.76.
Rising expectations for U.S. interest rate cuts this year, as well as growing hype about artificial intelligence (AI), have prompted many brokerages to raise their annual targets for the index , with some expecting the index to reach as high as 6,000 points by 2024.
In May, Deutsche BankIt raised its year-end target for the S&P to 5,500 points, expecting to rely on strong corporate profits to support stock valuations.
The brokerage said the recent decline in the stock market in August due to concerns about a weak labor market and downgrades of technology stocks is now “over” and conditions are now favorable for earnings growth.
As annual wage growth remained stable in August, concerns about a cooling labor market have dissipated, the report said .
Strategists led by Binky Chadha, Deutsche Bank’s chief U.S. equity and global strategist, said some of the factors supporting the market include “a shift from inventory burn to inventory replenishment,” increased capital spending outside of technology stocks, broad manufacturing improvements and manufacturing growth.
The brokerage expects share buybacks to rise to about $1.2 trillion next year as they remain in line with current earnings of $1 trillion.
The report said equity inflows have been robust over the last four months and have defied overall seasonal trends, leading to a rise in underlying corporate earnings and equity returns.
Deutsche Bank also reiterated its earnings per share (EPS) forecast for S&P 500 companies of $258 in 2024 and $285 in 2025.
