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Yardeni Research projected further gains for the S&P 500 (SP500)(SPY), raising its target to 5,800 for 2024 as it expects cooling inflation to lead the Federal Reserve into starting interest-rate cuts this year.
The year-end target was raised from 5,400. The new projection implies a nearly 3% upside for the benchmark (SP500)(IVV) from Wednesday’s record closing high of 5,633.91.
“We expected [Thursday’s] CPI report to come in soft, increasing the chances of a September rate cut and several more in the coming year,” Eric Wallerstein, chief markets strategist at Yardeni Research, said in a Thursday post on X (formerly Twitter).
Odds of a September rate cut of 25 basis points soared to +87% in the fed funds futures market Thursday after the June Consumer Price Index report showed the headline rate falling 0.1%, the first M/M decline since May 2020.
“We’re still targeting SPX 8000 by the end of [the] decade. Our Roaring 2020s scenario is just being discounted faster than we anticipated,” Wallerstein said. “We don’t think rate cuts are necessary, but with Q2 GDPNow at 2% and $6.15 trillion in money-market funds, rate cuts will further fuel a meltup.”
Yardeni Research has previously laid out its “Roaring 2020s” outlook that stocks will push higher throughout the decade, finding support from economic expansion after activity was hit hard by the COVID pandemic.
The S&P 500’s (SP500) current narrow breadth of stocks contributing to its rise should expand with better-than-expected Q2 earnings in non-tech companies, Wallerstein said.
Investors can track U.S. large-cap stock indexes through ETFs including (VOO), (SH), (QQQ) and (DIA).