S&P 500 to see small gain in 2024 as US economic risks rise – Reuters poll
1:06 PM UTC – November 21, 2023
NEW YORK (Reuters) – According to a Reuters poll released on Tuesday, strategists predict that the S&P 500 will only see a modest 3% increase next year, with the possibility of a U.S. economic slowdown or recession being the biggest risks for the market in 2024.
The median forecast of 33 strategists polled by Reuters over the past week and a half suggests that the benchmark index (.SPX) will reach 4,700 by the end of next year, a 3.4% increase from Monday’s closing of 4,547.38.
When asked if U.S. stocks will hit a record high in the next six months, nine out of 13 strategists answered yes, with most expecting it to happen in early 2024.
Recent weeks have seen a strong rally in Wall Street stocks, driven by the belief that the Federal Reserve will stop raising interest rates and may even cut them next year.
Investors were pleased with the October inflation data, which showed a decrease in gasoline prices. So far in 2023, the S&P 500 has risen by approximately 18%.
While the Fed has kept rates steady in November, it has raised its policy rate by 525 basis points since 2022 in an effort to control inflation.
There are concerns that the economy could enter a recession next year or at least experience a slowdown.
“We see the economy weakening further into 2024, and, at some point the consumer will break,” said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.
However, Christopher believes that the U.S. economy could quickly transition to recovery mode in the second half of the year. Wells Fargo Investment Institute predicts that the S&P 500 will end next year between 4,600 and 4,800.
Market expectations include a deceleration in inflation, with a greater than 50% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool on Monday.
Goldman Sachs’s economic team, on the other hand, stated in a recent note that the Fed will hold off on cutting rates until the fourth quarter of next year, as stronger-than-expected economic growth could prevent a recession.
Strategists also identified geopolitical problems, such as the conflict between Israel and Hamas militants in Gaza, as additional risks to the market in 2024.
When asked about the U.S. corporate profit outlook, ten out of 13 strategists expect earnings to grow in the next six months.
Based on LSEG data, overall S&P 500 earnings growth for 2023 is estimated at 2.3% after a weak first half of the year. Analysts anticipate a rise of 11.2% in earnings for 2024 compared to the previous year.
Although recent market gains have led to increased valuations, with the S&P 500 index’s forward 12-month price-to-earnings ratio currently at 19.1, technology (.SPLRCT) remains a favorite sector going into 2024, having already risen by 52% this year.
“The technology revolution continues,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
The poll also predicts that the Dow Jones industrial average (.DJI) will reach 38,000 by the end of next year, representing an 8% increase from Monday’s close. The Dow has risen by 6% so far in 2023.
Reporting by Caroline Valetkevitch; additional reporting by Chuck Mikolajczak, Sinead Carew and Stephen Culp in New York; Additional polling by Pranoy Krishna, Rahul Trivedi and Sarupya Ganguly in Bengaluru, Editing by Alexandra Hudson
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What sector is expected to perform well in 2024 despite increased valuations
Grogan, and Lewis Krauskopf; Editing by Jonathan Oatis
In a recent Reuters poll, strategists have predicted that the S&P 500 will only see a modest 3% increase next year. The biggest risks for the market in 2024 include the possibility of a US economic slowdown or recession.
According to the median forecast of 33 strategists polled by Reuters, the benchmark index is expected to reach 4,700 by the end of next year, marking a 3.4% increase from its closing on Monday at 4,547.38.
When asked about the possibility of US stocks hitting a record high in the next six months, nine out of 13 strategists answered affirmatively, with most expecting it to happen in early 2024.
Recent weeks have seen a strong rally in Wall Street stocks, driven by the belief that the Federal Reserve will halt its interest rate hikes and may even consider cutting rates next year. Investors have been encouraged by the October inflation data, which showed a decrease in gasoline prices. So far this year, the S&P 500 has risen by approximately 18%.
While the Federal Reserve kept rates steady in November, it has raised its policy rate by 525 basis points since 2022 as a measure to control inflation. However, concerns remain that the economy could enter a recession next year or at least experience a slowdown.
Paul Christopher, the head of global investment strategy at Wells Fargo Investment Institute, predicts a further weakening of the economy into 2024, stating that at some point, the consumer will break. Nevertheless, Christopher believes that the US economy could transition quickly to recovery mode in the second half of the year. Wells Fargo Investment Institute predicts that the S&P 500 will end next year between 4,600 and 4,800.
Market expectations include a deceleration in inflation, with a greater than 50% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool on Monday. Goldman Sachs’s economic team, on the other hand, predicts that the Fed will hold off on rate cuts until the fourth quarter of next year, as stronger-than-expected economic growth may prevent a recession.
Strategists also identified geopolitical problems, such as the conflict between Israel and Hamas militants in Gaza, as additional risks to the market in 2024.
Regarding the US corporate profit outlook, ten out of 13 strategists expect earnings to grow in the next six months. Overall S&P 500 earnings growth for 2023 is estimated at 2.3% after a weak first half of the year. Analysts anticipate a rise of 11.2% in earnings for 2024 compared to the previous year.
Although recent market gains have led to increased valuations, with the S&P 500 index’s forward 12-month price-to-earnings ratio currently at 19.1, the technology sector remains a favorite going into 2024. It has already risen by 52% this year.
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, stated that “the technology revolution continues.”
The poll also predicts that the Dow Jones industrial average will reach 38,000 by the end of next year, representing an 8% increase from Monday’s close. The Dow has risen by 6% so far in 2023.
In conclusion, strategists foresee a modest increase in the S&P 500 next year, with concerns about a potential economic slowdown or recession. The market also faces risks from geopolitical issues. Despite increased valuations, the technology sector is expected to perform well in 2024.
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