Shares ripped increased within the first three months of the yr amid investor bets that the US financial system stays on strong footing.Now, the important thing debate on Wall Avenue coming into the second quarter is whether or not the S&P 500 (^GSPC) has any extra room to run after its finest begin to a yr since 2019.The market rally has broadened over the previous few months, transferring from a narrative of some shares driving the foremost averages increased to buyers piling into sectors delicate to financial shifts like Supplies (XLB) and Industrials (XLI). The prevailing wager is that the US financial system will proceed to develop as inflation falls nearer to the Fed’s 2% aim, a so-called delicate touchdown state of affairs.However some suppose after 5 straight constructive months for the S&P the market may very well be due for a pullback.”You’ve got had this robust transfer … in anticipation of, let’s name it a Goldilocks or delicate touchdown atmosphere,” mentioned Citi US fairness strategist Scott Chronert. “And so we predict we now have to count on a digestive interval right here to digest these beneficial properties and permit a while for the basics to develop into the worth motion.”Chronert holds a 5,100 name on the S&P 500 and hasn’t shifted that forecast increased as his crew waits for extra affirmation that financial progress stays resilient and earnings will are available higher than at present priced into the market.The fairness technique crew at Goldman Sachs sits in an identical place, sustaining a 5,200 year-end goal for the S&P 500. However given shares’ surge previous their present goal, the crew just lately explored 4 different eventualities for the benchmark in a analysis notice.The 2 draw back instances discover comparable subjects to these usually referenced by the persistent bears on the Avenue. One is the place the market’s expectations for earnings in large-cap tech are too optimistic, and that brings down the entire market. The opposite is that the Federal Reserve’s battle in opposition to inflation results in a higher-for-longer rate of interest technique that finally stunts financial progress and spawns recession.Story continuesBoth destructive eventualities would result in the S&P 500 hitting 4,500, per Goldman’s estimates. And a few on Wall Avenue imagine that draw back state of affairs is the most probably end result.That group is cautious of current bumpy inflation readings and the way these might shift the expectation for Fed rate of interest cuts later this yr.”We imagine that there’s a threat of the narrative turning again from Goldilocks in the direction of one thing like Seventies stagflation, with important implications for asset allocation,” JPMorgan chief market strategist Marko Kolanovic wrote in a notice to purchasers on Feb. 21. He is maintained a name for the S&P 500 to fall to 4,200 by the tip of the yr.Upside risksThe different two instances Goldman examined see not less than 10% upside within the benchmark common. One could be pushed by additional outperformance from Huge Tech, which might see already elevated valuations in that sector balloon additional as AI hype drives additional beneficial properties. The opposite is a continued broadening of the market rally, with a rise in earnings from the remainder of the S&P 500 exterior of megacap tech and a strong financial outlook supporting a rally in shares not simply associated to the AI commerce.Largely, this might be an extension of the present leg of the rally, which noticed Vitality (XLE) and Supplies lead the sector motion in March.”We stay fairly constructive,” Goldman fairness strategist Ben Snider mentioned. “And we’re advising buyers to remain invested within the US fairness market, exactly as a result of we do suppose these upside dangers outweigh the draw back dangers and we predict the financial system appears to be like very wholesome. Recession appears to be like unlikely.”The Wall Avenue entrance to the New York Inventory Change is seen in New York Metropolis, Nov. 15, 2022. (Brendan McDermid/REUTERS/File Picture) (Reuters / Reuters)Others on Wall Avenue share Snider and Goldman’s sentiment. Since Deutsche Financial institution’s economics crew dropped its recession name in early February, the agency’s chief world strategist Binky Chadha has famous the fairness technique crew feels extra assured in its bull case for the S&P 500 this yr, which sits at 5,500, about 5% upside from present ranges.Deutsche Financial institution analysis exhibits the rally in shares has introduced $260 billion into the fairness market since Could. However these flows have been “in step with macro knowledge,” mentioned Chadha, pointing to the shift from consensus anticipating a recession to the present outlook for constructive financial progress and earnings transferring increased.Deutsche Financial institution additionally says the present threat urge for food available in the market sits considerably under ranges seen in prior rallies that fell off a cliff, just like the 2021 meme inventory craze.”It isn’t [at] a stage the place you may count on that as a result of positioning is so burdened that there might simply be an unwind in the midst of the night time for no purpose simply because persons are so lengthy,” Chadha mentioned.Josh Schafer is a reporter for Yahoo Finance. Observe him on X @_joshschafer.Click on right here for the most recent inventory market information and in-depth evaluation, together with occasions that transfer stocksRead the most recent monetary and enterprise information from Yahoo Finance