Given the stronger-than-expected report on the US labor market, strategists at UBS Global Wealth Management revised up their forecast for the S&P 500 index, saying that the index is likely to reach a record high before the end of this year.
"The probability of a soft landing of the US economy has increased and now we expect the Fed to cut rates four times this year, probably starting in May. According to our updated forecasts, in December 2024, the S&P 500 index will trade at 5,000 points, which is 5% higher than Tuesday's closing level," the strategists said.
The S&P 500 rose more than 24% in 2023, finishing Dec. 29 just 0.6% below its record close of 4,796.56 set on Jan. 3, 2022.
Commenting on Friday's report on the US labor market, which indicated employment growth of 216 thousand after an increase of 173 thousand in November, strategists said that there are reasons to expect a further decline in wage growth. "The JOLTS report presented last week showed that the share of workers who quit their jobs fell to 2.2% in November, which is below the pre-pandemic level. This may indicate that workers are becoming less confident in their ability to move to higher positions with higher pay," the strategists said, adding that given that the unemployment rate remains below 4%, consumption is likely to remain high. “We still expect a moderate increase in the unemployment rate in 2024, but we do not expect that the growing fear of unemployment will cause a sharp increase in savings and, consequently, a sharp reduction in household consumption,” UBS said.