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ECB Forecast Validates Our Bullish S&P Target of 5,750


ECB Forecast Validates Our Bullish S&P Target of 5,750

New York, NY, InfraCap Market Update - The ECB announced today a significant decrease in both its 2024 inflation forecast to 2.3% from 2.7% and its growth forecast from .8% to .6%.  President Lagarde also validated our view of a June rate cut by stating that there will be sufficient information to make a decision on rates by June.  The global bond market rallied on the lowered forecast with European bonds rallying over a half point, which are driving US rates lower.

 

The ECB announcement validates our view that EuroZone growth is stalled and inflation plunging which will force the ECB to cut in June.  Global central bank rate cuts are very bullish for both stock and bond prices as the cuts require injections of liquidity into the banking system causing a growth in the money supply, which tends to fuel increases in stock and bond prices as we saw in 2021.  We continue to forecast a summer stock market rally as the ECB cuts in June and the Fed cuts rates in July after continued slow declines in Y/Y Core PCE. 


Our price target on the S&P is 5,750 for year-end 2024 based on 21x 2025 consensus earnings estimates of 273.  Our target assumes a 10-year rate of 3.25%.  We expect value/yield stocks to lead the rally during the summer.  The risk to our target is to the upside as the recent NVDA earnings report validated that the AI boom is in its early stages and that continued momentum in these stocks could drive the S&P well above our target.

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