Deutsche Bank raises year-end S&P 500 target to 5,750 from 5,500 By Reuters

(Reuters) – Deutsche Bank raised its year-end target for the benchmark index to 5,750 points from 5,500, citing rising share buybacks, strong corporate earnings and robust inflows, spurred by strong risk appetite.

“We see S&P 500 earnings growth continuing to run robustly in the low double digits, in line with typical growth rates outside of recessions,” Deutsche Bank strategists said in a Sept. 12 note.

The new target represents a 2.75 percent increase from Thursday’s S&P close of 5,595.76.

Rising expectations of a US rate cut this year and hype around artificial intelligence (AI) have boosted the index, with many brokerages raising their annual targets for the benchmark and some expecting it to end 2024 by 6,000.

In May, Deutsche Bank raised its year-end target for the S&P to 5,500, counting on strong corporate earnings to support stock valuations.

The brokerage said a recent drop in stocks in August on fears of a weakening labor market and depreciation of tech stocks appears “over” for now, with the positioning falling again in line with earnings growth.

He added that fears of a cooling labor market were allayed as August wage growth stabilized since the start of the year.

Some aspects that will strengthen the market include a shift away from “re-stocking”, an increase in capital spending outside of technology stocks, a broader recovery in manufacturing and an increase in consumer confidence, strategies led by Binky Chadha, Chief of US equities and said global strategist at Deutsche Bank.

The brokerage expects share buybacks to rise to about $1.2 trillion next year as they keep pace with earnings, from the current $1 trillion.

Equity flows have been strong over the past four months and have defied typical seasonality, “which boosts potential corporate earnings and equity returns,” it said.

Deutsche Bank also reiterated its earnings per share (EPS) forecast for S&P 500 companies at $258 for 2024 and $285 for 2025.