After sidestepping last year’s scorching stock rally on concern about higher interest rates, Wall Street’s top forecasters can’t get bullish fast enough amid expectations for cuts by mid-year.

UBS is the latest bank to lift its outlook for US equities, ratcheting up its 2024 forecast for the S&P 500 Index by 6% on Tuesday, to 5,150, following the Federal Reserve’s dovish policy shift in December. The move comes roughly a month after the Swiss lender set its year-ahead call for the US equity benchmark at 4,850. RBC Capital Markets boosted its outlook last week, while Goldman Sachs Group Inc. did so in December, a month after setting it.

When publishing their year-ahead outlook on Dec. 11, UBS strategists Jonathan Golub and Patrick Palfrey emphasized upside risks to the firm’s views, citing robust earnings, cooling inflation, the prospect of easier monetary policy and favorable economic momentum.

“Given the Fed’s recent pivot, subsequent decline in rate expectations, and above-trend 2024 EPS revisions, we now embrace this upside scenario as our base case,” the duo wrote Tuesday in a note to clients.

US stocks have had a shaky start to 2024 on worries that the bullish tone and positioning became too stretched after big gains heading into year-end. Wagers on Fed rate cuts have spurred investors to increase their US stock exposure to the highest level in more than two years, Bank of America Corp.’s latest fund manager survey showed.

“Strategists are just as likely to be swept up in the enthusiasm as anyone else, and since few want to be laggards, the targets get raised along with the level of the market,” said Steve Sosnick, chief strategist at Interactive Brokers. “That said, I don’t recall them being revised higher this quickly after the start of the year – especially in the absence of a new S&P 500 high.”

The bulls took a hit Tuesday after Fed Governor Christopher Waller said the central bank can lower rates this year if inflation doesn’t reaccelerate, while emphasizing the Fed should be prudent and methodical with the pace of easing. Treasury yields climbed on the remarks and US stocks fell as traders trimmed bets on a rate cut as soon as March as well as the amount of total easing seen this year. The S&P 500 fell about 0.5% to 4,761.

Sell-side strategists have been mostly undeterred by the risk that the market has become overextended. Last week, RBC’s Lori Calvasina said the longer-term outlook for US equities remains constructive even if a weak start in January “is just the beginning of a phase of turbulence.”

She raised her end-2024 S&P 500 target to 5,150 this month from 5,000 late November. In December, Goldman’s David Kostin lifted his year-end S&P 500 outlook to 5,100, almost 9% higher from the 4,700 level he predicted in mid-November.

The average target of sell-side strategists tracked by Bloomberg now stands at 4,851 as of Jan. 16, compared to 4,546 in late November.

This article was provided by Bloomberg News.