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In 2024, a record-breaking ascent is anticipated for U.S. stocks, according to Bloomberg’s latest Markets Live Pulse survey. The survey projects that the S&P 500 Index will reach new heights, defying concerns of a recession, though a less robust consumer outlook may result in gains below this year’s remarkable 20% surge.
Respondents, numbering 518, foresee the S&P 500 climbing to 4,808 points in the coming year, surpassing its previous closing peak of 4,797 in January 2022. Additionally, predictions suggest a decline in the 10-year Treasury yield from this year’s peak of 5% to 3.8%.
A significant majority of respondents dismiss the possibility of a hard economic landing as the primary risk to markets, and many anticipate Federal Reserve interest rate cuts before July, reflecting a prevailing sense of confidence in the U.S. economic resilience.
Aneeka Gupta, Director of Macroeconomic Research at WisdomTree, attributes this optimism to “U.S. exceptionalism,” driven by a more favorable economic backdrop compared to China and Europe, improved earnings estimates, and more attractive valuations for the equal-weighted S&P 500.
This bullish sentiment contrasts sharply with initial concerns earlier in the year, when fears of a hawkish Fed and a potential U.S. recession led investors to brace for market volatility. However, the economy has defied pessimistic forecasts, with a resilient labor market and a faster-than-expected rebound in Corporate America’s earnings.
Leading Wall Street strategists from institutions such as Deutsche Bank AG and RBC Capital Markets also predict an all-time high for U.S. stocks in 2024, citing the S&P 500’s adaptation to the higher rate environment.
Despite the prevailing optimism, not all voices are equally sanguine. Bank of America Corp. strategist Michael Hartnett warns that a further drop in yields to around 3% in the next year could signal a weakening economy, potentially dampening stock performance. About 33% of survey participants share concerns about an exhausted consumer posing the biggest risk to the rally in 2024.
The median forecast in the survey, while indicating a record closing high, suggests a modest gain of around 4% from the S&P 500’s current levels. This falls below the average 19% jump recorded in years of index advancement and the intraday all-time peak of 4,819.
Goldman Sachs Group Inc. strategists advocate staying invested in stocks and avoiding selling during periods of volatility. According to the survey, 26% of participants plan to increase their holdings over the next month, signaling confidence in the market’s future trajectory.
The U.S. is expected to maintain its status as a safe haven, with 43% of respondents predicting U.S. stocks will outperform international peers in 2024. However, investors are diversifying their portfolios, shifting focus from the dominating tech stocks to undervalued sectors such as small caps and value shares.
Shanti Kelemen, Chief Investment Officer at M&G Wealth, notes that the rally in major tech stocks is unlikely to be sustained over the long term, and investors are exploring more traditional sectors with attractive valuations.
Looking ahead to potential bargains in 2024, respondents overwhelmingly point to emerging markets outside Greater China. Hong Kong’s Hang Seng Index, on track for a fourth year of losses in 2023, is anticipated to remain a laggard in the coming year, while gold is expected to gain approximately 5%.
