S&P 500 to reach record 5,100 next year, fueled by bumper corporate profits, BMO says

The stock market rally will diversify next year amid a broader, "normal for longer" trend, according to BMO Capital Markets. Chief investment strategist Brian Belski set his 2024 base case target of 5,100 for the S & P 500, which implies an almost 12% rally from Friday's close. That represents a slight slowdown in market growth from this year, which he believes will be difficult to repeat based on historical bull market trends. The broad market index recently inched just above BMO's 2023 year-end price target of 4,550. "We believe U.S. stocks will attain another year of positive returns in 2024, albeit while demonstrating more sanguine, broadly distributed, and fundamentally defined performance relative to the last decade or so. In other words, normal and typical," Belski wrote in a Monday note. .SPX YTD mountain S & P 500 in 2023 "Liquidity-induced performance and 0% interest rates are not typical. All-or-none investing – e.g., all large cap + no small cap; all Technology + no Financials; all growth + no value; all stocks + no bonds; all momentum + no fundamentals have clouded and defined the investing landscape for most of the past 15 years, in our view. But that does not make it normal or typical," Belski added. "To the contrary, it is normal for good news to be good news and market performance to be dictated and defined by fundamental and company-specific analysis." This normalization, which BMO forecasts will be at least a three-to-five year process, will result in a more normal and typical trend, the strategist believes, rewarding "good old-fashioned stock picking." Belski believes the bull market, which began at 2022's mid-October low, will continue into its second year in 2023. He remains unfazed about a recession due to robust demand for labor. If a recession were to occur next year, it would be a "recession in name only," or "RINO," said Belski. The firm, a unit of Bank of Montreal, also projects S & P 500 earnings per share rebounding around 13.6% to $250 in 2024. One market trend that will notably improve next year is the percentage of stocks outperforming the broader index, Belski added. With this backdrop in mind, the strategist underscored the importance of a balanced portfolio. "In a simple sense, we believe investors will need to own a little bit of 'everything' and not tilt too far in one direction or another from a sector, style, and size perspective – a sharp contrast to the trends that prevailed during 2023," Belski said. "However, this should not be interpreted as a recommendation to be more passive when making decisions – to the contrary, we believe active investment strategies will be even more important next year as many of the largest stocks that drove performance within sectors are unlikely to maintain that momentum in 2024, forcing investors to search for other opportunities further down the market cap spectrum," Belski continued. —CNBC's Michael Bloom contributed to this report.