Although the market has had a wild year, the S&P 500 last week reached a four-month high, and an increasing number of analysts predict that this momentum will last until 2024. Some even think that next year will see the benchmark index hit a new all-time high. What’s going on: Despite initial concerns about the state of the economy, investors had a positive year this year. There was no recession as predicted, and inflation decreased.
According to Candace Browning, head of Bank of America global research, “2023 defied almost investors and everyone’s expectations: recessions that never materialized, rate cuts that didn’t materialize, bond markets that didn’t bounce, except in short-lived, vicious spurts, and rising equities that pained most investors who remained cautiously underweight.”
A number of Wall Street banks’ analysts predict that inflation will continue to decline into the upcoming year. They forecast that interest rates will be lowered by central banks without impacting the economy or causing price instability.
While acknowledging that there may be more downside risks than upside ones, we believe that 2024 will be the year that central banks successfully implement a soft landing, according to Browning.
The markets will benefit from this. The S&P 500 is expected to reach an all-time high next year, according to predictions from RBC, Bank of America, BMO Capital Markets, and Deutsche Bank.
The US economy has passed “the hard part,” according to Goldman Sachs analysts. In 2024, they predict “only limited recession risk,” or roughly 15%.
What experts are saying: Lori Calvasina of RBC Capital Markets wrote in a note last week, “We remain constructive on the US equity market in the year ahead, even though the November rally has likely pulled forward some of 2024’s gains.”
In the upcoming year, she projects the S&P to rise by roughly 10%, closing 2024 at 5,000. At the moment, the S&P 500 is at 4,550.
Savita Subramanian of Bank of America echoed this optimistic outlook, predicting in a Monday post that the S&P 500 will reach an all-time high of 5,000 by year’s end (the current record closing high of 4,797 was reached in January 2022).
According to Subramanian, markets won’t necessarily rise because the Federal Reserve is predicted to start lowering interest rates next year. Rather, it will happen because businesses have demonstrated their ability to successfully adjust to changes in Fed policy while announcing robust earnings.
According to Brian Belski, chief investment strategist at BMO, the S&P 500 will end 2024 at a strong 5,100.
He stated in a note that he thought 2024 would mark the start of a process that would take at least three to five years and see US stocks perform more normally and predictably against the backdrop of normal and typical GDP and earnings growth, bond yield ranges, and valuation.
Deutsche Bank analysts also believe that 2024 will be a bull market year.
Examining earnings: Following several years of pandemic shutdowns, inflation concerns, and uncertainty surrounding the recession, S&P 500 companies are starting to return to normal during this earnings season.
According to FactSet data, the number of companies discussing inflation during their earnings calls was at its lowest point since the second half of 2021, and the number of companies discussing recession declined for the fifth consecutive quarter.
According to FactSet, analysts anticipate that corporate earnings will increase by 6.7% (year over year) in the first quarter of 2024 and by 10.5% in the second quarter of the same year.
