Morgan Stanley said on Monday it expects the S&P 500 to end 2024 at 4,500, and predicted earnings recovery through the year.

The target represents a 2% upside from current levels.

The index on Friday closed 1.6% higher at 4,415.24. Strategists at the brokerage led by Michael Wilson expect a 7% uptick in earnings per share (EPS) for index companies next year, along with a 4-5% revenue growth and “modest” margin expansion amid easing labor costs.

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However, near-term earnings headwinds will persist into early next year before a “durable” recovery takes hold, Wilson said.

Wilson sees strong earnings environment in 2025 with a 16% jump in profit driven by artificial intelligence-led improvement in productivity and margin expansion.