We’ve gotten to that point in the year where analysts, now bored with this year, start looking forward and predicting wildly. You cannot put much stock (pun) into these predictions, as they typically represent nothing, just the wild reaching of people paid to sit around and guess. For example, last year analysts were predicting that not only would we slip into a recession, the recession would be devastating and The Fed NEEDED to stop raising rates. These analysts were wrong (laughably wrong) but they are back and they are giving us mixed signals. I’ll hit the highlights.

The average price target for the S&P 500 correlated with about a ten percent gain for the S&P 500, which is about par for the course. There was some disparity in the predictions, however, with some predicting ten percent losses and others predicting 20 percent gains. First, we have good ole JPMorgan.

JPMorgan is predicting that the S&P slips back to 4,200, which would be a nine percent fall. Their reason is mainly that consumers are going to run out of money. Combine a fall in consumer confidence and spending with slowing overall US growth, and they believe next year will be rough. They also add, “Negative corporate sentiment should be a catalyst for sharply lower estimates early next year." Translation: we are right, and everyone else will see that next year.

I disagree with JPMorgan, I believe that consumers will stay strong in buying like they have for the past decade, and growth will follow.

Wells Fargo believes we will stay flat, with the S&P going to 4,625 (it’s at 4600 as I write this.) Their reasonings were that stocks are overvalued right now, the VIX is low, and basically, we are doing pretty well right now. That would imply a downside, but because of lowering interest rates, they think everything will basically offset in an extremely volatile mess.

Barclays had about the same prediction, (4,800) predicting that inflation will ease rapidly, but they also predict economic deceleration. Overall they are saying that the market will go up in the new year because there is nothing awful on the horizon, but that slowing economic growth will slow everyone down.

Bank of America’s prediction (5,000) falls in line with what I believe about the coming year. Here is a highlight of their prediction, “We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted (as they are wont to do) to higher rates and inflation.” I would agree with this, I feel like we have been through the storm, two rapidly escalating wars, news of a slowing Chinese economy, inflation, rising interest rates, and so much more; despite all of this, the market has given 20% gains year to date. I see no reason prices cannot go higher, and combined with lowering interest rates, I think we are in for a good year.

Capital Economics made their prediction, and while it is about the right amount, I do not think it is for the right reasons; “If AI enthusiasm is inflating a bubble in the S&P 500, it’s one that is still in its early stages. We think the index could therefore make further gains: our end-2024 forecast is 5,500, ~20% above its current level.” Bill Gates and Sam Altman both believe that AI growth is going to get harder, and I would agree with them. We got past the easy part, but now development is going to get much more difficult. You can think about it like chip manufacturing, it is getting harder and harder to shrink chips even further. In 2014, Intel dropped its 21nm (nanometer) chip. Now TSMC is making 3nm chips, but progressing to 1nm chips seems to be nearly impossible. Growing gets harder the further you go, and that I believe will start to crop up for AI.

To summarize my position, I believe the S&P 500 will reach as far as 5,200. I believe The Fed will lower interest rates before anyone thinks they will. I also believe that slowing economic growth will reverse under lowered interest rates, and I think The Fed will stick the soft landing so well, that it might get JPOW a Nobel Prize in Economics when he retires and writes a paper about this.