Wall Street thinks stocks have room to run even higher than originally thought

The high-water mark for Wall Street’s S&P 500 (^GSPC) predictions has moved up yet again.

The benchmark index has hit new record highs to kick off 2024. The surge in stocks has already put the S&P above the average Wall Street strategist year-end target less than two months into the year. And now, two strategists are boosting their projections for how far stocks can run in 2024.

Last week, Goldman Sachs boosted its year-end target from 5,100 to 5,200. On Tuesday, UBS also boosted its target. The UBS Investment Bank equity strategy team led by Jonathan Golub now sees the S&P 500 ending this year at 5,400, up from a prior call of 5,100. This reflects nearly an 8% increase from Tuesday’s opening price.

“Despite our bullish outlook, it appears we were not bullish enough,” Golub wrote.

Both Goldman Sachs and UBS expressed a more upbeat outlook for corporate earnings this year than previously forecast when describing why they see further upside in stocks.

Their new predictions come as earnings for S&P 500 companies are now expected to grow 3.2% in the fourth quarter, up from a 1.9% projection a month ago, per FactSet. For the full year 2024, analysts project the S&P 500 will grow 10.9%.

In a research note boosting the bank’s S&P 500 projection on Feb. 16, Goldman Sachs chief US equity strategist David Kostin wrote earnings growth will be “the primary driver” of remaining upside for stocks during 2024.

Kostin noted that the more upbeat outlook on earnings stems from “upgraded outlooks on US economic growth and mega-cap profit margins.” Specifically, Goldman’s call on earnings growth stems from megacap companies.

In the past three months, earnings estimates for the “Magnificent Seven” tech stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) have increased by 7%. Meanwhile, margin…