Strong performance from big technology companies should offset declines in other parts of the market toward the end of the year, according to Barclays. Strategist Venu Krishna raised his 2024 S&P 500 target to 5,600 from 5,300, which puts Krishna in the median position among strategists in the CNBC Pro Market Strategist survey. The new forecast suggests an upside of less than 1% from Monday's close. The S&P 500 has already risen more than 16% year-to-date, hitting record highs and beating many of Wall Street's expectations. .SPX YTD SPX YTD “While the macroeconomic slowdown will likely be a headwind for ex-tech EPS growth through the end of the year, we expect this to be offset by continued better-than-expected gains in Big Tech, as we saw in the first half,” Krishna wrote in a note. Investors have flocked to tech stocks this year on hopes that artificial intelligence will boost corporate earnings. The S&P 500 tech sector will rise 29% in 2024, with AI stocks Nvidia and Super Micro Computer more than doubling. That said, tech has come under pressure recently as investors have trimmed positions in the sector and shifted to more cyclical parts of the market such as small caps. But Krishna is unfazed. “Recent volatility in US equities should be fairly contained,” he says. “The major unwinding seems more systematic/technical motivated than fundamental (crowded discretionary fund positions, rising systematic equity exposure, June-July rally was frothy/mostly multiple expansion, market was already suggesting ~74% probability of September cut even before June CPI).” “While further painful trading is possible, we see this as an opportunity to reset valuations as focus shifts to Q2'24 earnings.” Outside of technology, Barclays likes the utilities sector, noting that it's “the only sector outside of technology that we expect to generate EPS growth above the SPX in fiscal 2024.” 6,500 in 2025? Barclays also has a target for the S&P 500 of 6,500 for 2025, which would represent a 16.8% upside from Monday's close. Krishna said that while there's a lot of uncertainty in forecasting for next year, “we expect most of the macro inputs into our EPS framework to be smaller (but still negative) headwinds to earnings growth next year.”
