S&P 500 stumbles in 2024 but Citi bets on a 20% rebound by year-end
The S&P 500 has faced a challenging year, dropping around 6.7% to sit near 6,417. Despite this dip, Citi analysts remain confident in their year-end forecast of 7,700. Their outlook depends heavily on earnings growth and market stability, though rising tensions with Iran now pose a fresh risk to investor sentiment. Since early 2024, the so-called Magnificent 7—Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla—have dominated market performance. These tech giants, particularly Nvidia with a market cap nearing €3.7 billion, have driven gains while the broader index lagged. Nvidia alone now accounts for up to 7.6% of the S&P 500's weight, underscoring its outsized influence.
The technology sector continues to lead, with 2026 earnings forecasts revised up by over 11% since January. Meanwhile, the remaining 492 companies in the S&P 500 are expected to achieve low-double-digit profit growth next year. Smaller-cap stocks have also shown resilience, with small-cap and mid-cap benchmarks rising more than 3% and 4% respectively in 2026. Citi's baseline projection for the S&P 500 remains at 7,700, requiring a 20% climb from current levels. This relies on earnings per share reaching $320 by 2026. Their bullish scenario lifts the target to 8,300, assuming stronger earnings and higher valuations. However, a bearish case of 5,700 accounts for weakening fundamentals and shrinking price-to-earnings ratios.
Citi's forecasts hinge on steady earnings growth and stable market conditions. The 7,700 target demands significant gains, while geopolitical risks—especially Iran-related tensions—could disrupt progress. Investors will watch whether tech-led momentum and smaller-cap strength can offset broader economic pressures.
