7 Reasons for S&P 7,000

Here are seven reasons why this bull market has room to run and why the S&P 500 may hit 7,000 in the not-too-distant future:

1. Lower Rates. With the Federal Reserve now easing interest rates, this brings a lower cost of capital for many companies. Lower rates can translate into better margins.
2. Lower Inflation. If input costs and wage growth are decelerating or if some of these costs come down, this is good for consumers and corporations. Lower costs can translate into higher margins.
3. AI Integration. Now that artificial intelligence (AI) is here, more non-tech companies are using it. AI can reduce costs, improve efficiency, and aid R&D. All this could lead to improved margins.
4. Earnings. Consensus estimates are for large companies to grow by 17% and small- to mid-cap companies to grow by 27% next year (1). We like the current momentum we’re seeing with earnings surprises, and we think analysts could revise estimates higher from here.
5. Calmer Markets. Systematic and risk-controlled strategies will likely ease back into equities as election uncertainty clears and realized volatility shifts lower. The most bearish of short investors may capitulate and eventually throw in the towel.
6. Cash. There’s more than $6.5 trillion sitting in money market funds right now. We also may see for the first time more than $1 trillion in stock buybacks next year (2).
7. Healthy Consumers. Never in history has the US consumer been this well off (see the chart below). A healthy and confident US consumer could keep the current market grinding higher, especially if we continue to see more of the “buy the dip” mentality and as households participate more in qualified retirement plans.

Household Net Worth as a % of Disposable Income Is Near All-Time Highs

Sources: Bloomberg, Federal Reserve, WCG, 10/28/24

1. S&P Global Operating Earnings and Earnings Estimates as of 10/23/24.

2. Goldman Sachs, https://money.usnews.com/investing/news/articles/2024-03-07/goldman-sachs-lifts-stock-buyback-forecast-for-s-p-500-companies

Index Definitions

The S&P 500 Index is a capitalization-weighted composite that measures the stock price performance of 500 publicly-listed companies across all the major industries of the U.S. economy.

Disclosures

Important Information

Investment advice offered through WCG Wealth Advisors, LLC, an SEC registered investment advisor. Indices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the companies as well as broad market, economic and political conditions. Stock investing involves risks, including fluctuating prices and loss of principal.

This is for educational / general purposes only, does not constitute investment, tax or legal advice and should not be relied on as such. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in making an investment decision for any individual. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The opinions referenced are as of October 28, 2024. These comments should not be construed as recommendations but as an illustration of broader themes.

Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.

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Publication Date: October 28, 2024

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