It has been the debate of 2023: Will there be a hard landing for the US economy? A soft landing? No landing? Bank of America says that in 2024, we'll see a soft landing. The bank's strategists say 2024 will be the "the year of the landing," with a bullish price target of 5,000 for the S&P 500 (^GSPC). Bank of America US & Canada Equity Strategist Ohsung Kwon joins Yahoo Finance Live to break down the call.

Kwon elaborates on how their strategists made their call: "We believe that earnings can continue to accelerate despite GDP potentially slowing down, and if that's the case, that actually has been the best environment for equities. When GDP is slowing down and EPS is accelerating, that doesn't happen very often but that's our base case actually. And if it does happen next year that sets up very well for equities."

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Video Transcript

JULIE HYMAN: Well, the year of the landing. That's what Bank of America is calling 2024. Strategists at the firm say they expect disinflation to continue globally, allowing central banks to cut rates midway through the year. BofA also saying the S&P 500 will end the year at 5,000, an all time high. Not because of rate cuts, but because of corporations resilience in this higher rate environment. Joining us now, Ohsung Kwon, who is Bank of America US and Canada equity strategist, who helped put together that outlook for next year. Thanks for being here with us, Ohsung. Appreciate it. So when you look at next year, whatever the landing is going to be, is your 5,000 call sort of landing agnostic, if you will? Unless it's really outside the variations of weak recession to weak gains, I guess, in the economy.

OHSUNG KWON: Yeah. Thanks for having me today. Great to be here. So we are forecasting 5,000 on the S&P 500 for next year. And our base case is basically soft landing in the US economy. The reason why we're bearish is not because we think the Fed is going to cut aggressively, but rather because of what the Fed has done already in terms of controlling inflation down, not putting the economy into recession.

And during that period, companies have adapted to this higher interest rate environment, earnings started inflecting. And in fact, we think that Q2 was the bottom in terms of this earnings cycle. And we think earnings are likely to accelerate into 2024. Positioning is still pretty bearish. And we think we are past the peak macro uncertainty in terms of the Fed inflation and rates. And I think that sets up pretty well for equities into 2024.

PRAS SUBRAMANIAN: And I was saying, you know, I don't know if you heard. We were just talking about the Fed expectations there. The market clearly expecting here that the Fed's done hiking, cuts are in the pipeline next year. Is that your base case, Ohsung, as well?

OHSUNG KWON: Yeah. So our economists are forecasting a couple of rate cuts starting in mid next year. But what we highlighted was that you don't want-- as a bull, you don't want a Fed easing cycle for wrong reasons. Historically, a Fed easing cycle, combined with credit tightening cycle, has been the worst environment for equities. So if it's a recession driven Fed easing cycle then, it's more bearish than bullish.

And you almost want soft landing. No-- no recession. Credit markets staying healthy. The economy staying healthy. And with this inflation-- we believe that earnings can continue to accelerate despite GDP potentially slowing down. And if that's the case, that actually has been the best environment for equities, when GDP is slowing down and EPS is accelerating. That doesn't happen very often. But that's our base case, actually. And if it does happen next year, that's very well for equities.