Wall Street strategists abandoned their usual bullishness heading in 2023, only to get blindsided by a ferocious rally. Now, they’re going back to business as usual for the coming year: predicting another annual gain.

Strategists at Bank of America Corp., BMO Capital Markets and Deutsche Bank AG are among those expecting that the S&P 500 Index will advance again next year, pushing it back over early 2022’s record high. Less optimistic calls from Goldman Sachs Group Inc. and Societe Generale still predict that equity prices will drift a little higher by the end of 2024, even if they remain just shy of the previous peak.

The outlooks from Wall Street’s soothsayers are a sharp shift from their predictions a year ago, when most were warning that higher interest rates would trigger a recession and crater the stock market. Instead, the S&P 500 is up more than 18% in 2023, defying the odds amid continued economic momentum and an artificial-intelligence frenzy that drove technology shares to outsized gains.

NOTE: Strategists’ S&P 500 Index Estimates for Year-End 2024 (Table)

That’s leaving sell-side forecasters more optimistic about next year, albeit with a more guarded outlook: The average target calls for a 3.5% gain in the S&P 500, according to data compiled by Bloomberg.

Deutsche Bank’s Binky Chadha and BMO’s Brian Belski, among few who correctly predicted an advance at the start of this year, now have some of the highest year-end targets for the S&P 500 among their sell-side peers: 5,100 — a 12% gain from Friday’s close. Chadha said favorable trends in inflation and a jump in corporate earnings will be a key driver, while Belski cited expectations for a resilient labor market, easing consumer-price pressures, and Federal Reserve rate cuts in the second half of the year.

Savita Subramanian at Bank of America, one of the first to flip to a bullish view earlier this year, sees the index ending 2024 at 5,000, “not because we expect the Fed to cut, but because of what the Fed has accomplished” with its rate hikes, bringing inflation down and making companies more efficient. Goldman Sachs’s David Kostin, who also turned more constructive earlier this year, sees the benchmark capping next year at 4,750, a roughly 4% gain that would leave it just shy of the 4,796.56 closing peak in January 2022.

This year’s run has also humbled those who expected the bear market of 2022 to persist. Morgan Stanley’s Mike Wilson — a staunch equity pessimist — has yet to see his gloomy call materialize and has also turned more constructive in his view for the next year. He sees the forces behind the recent rally loosing steam but expects the S&P 500 to finish 2024 at 4,500, roughly where it is now.

The potential for an economic downturn, a stock market led by a narrow base of big winners and a slump in corporate earnings are some of the key concerns raised by skeptics of the recent rally — and those risks haven’t gone away. There’s also the chance that equities will be dragged down as high interest rates keep rippling through the economy.

But for now, at least, the market has continued to power higher as the US economy has exhibited surprising resilience.

“If you’re a strategist at one of the big firms and you’re intellectually honest and do it for long enough, you’re going to fall into what I call a two-by-two grid: you’re going to be bullish, bearish, right, and wrong – and you’re going to live part of your career in all four quadrants,” said Adam Parker, CEO of Trivariate Research and former Morgan Stanley chief US equity strategist.

“I think it’s fashionable to make fun of strategists when they’re wrong, but at the end of the day, as you have a process you can respect and understand what drove them to that decision, they can still be valuable.”