Following a disastrous 2022, markets surged in 2023, with the Nasdaq 100 and S&P 500 rising by more than 50% and more than 20%, respectively.
Investors were able to get over their anxieties of a possible recession and return to stocks thanks to a robust economy, moderate inflation, and a possible peak in interest rates. The main concern among investors right now is whether the robust market rally can last until 2024 or if a downturn in the economy and the ensuing stock market crash are on the horizon.
A comprehensive summary of the leading Wall Street predictions for the stock market in 2024 has been compiled by Business Insider.
Here are the predictions made by Wall Street for the upcoming year, ranging from economic recessions to the continuation of the bull market.
BCA Research: pessimistic, with a 3,300 price target for the S&P 500
According to BCA Research’s 2024 prognosis, a recession could begin next year, and the S&P 500 could see its worst drop since 2008.
“A recession in the US and euro area was delayed this year but not avoided. Developed markets (DM) remain on a recessionary path unless monetary policy eases very significantly. As such, the risk/reward balance is quite unfavourable for stocks,” BCA Research said.
If the Federal Reserve quickly lowers interest rates, the stock market might not experience such a severe decline as the previous year, but BCA Research isn’t holding its breath because they don’t think inflation will decline rapidly.
“We remain in the disinflationary camp but expect that inflation will not slow quickly enough for the Fed and the ECB to cut rates in time to prevent a significant rise in unemployment. Unless a recession occurs imminently or inflation completely collapses, the Fed is unlikely to cut rates before next summer,” BCA Research said.
According to BCA Research, the S&P 500 would range between 3,300 and 3,700 in the case of a recession the following year until a final recovery shows up.
JPMorgan: negative, 4,200 is the S&P 500 price objective
According to JPMorgan, there is little reason to believe that stock prices would rise in 2024 due to high market valuations, high-interest rates, a declining consumer, growing geopolitical threats, and the possibility of a recession.
“We expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed,” JPMorgan’s Marko Kolanovic and Dubravko Lakos-Bujas said in their 2024 outlook note.
“Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lacklustre global earnings growth with a downside for equities from current levels,” JPMorgan said.
Morgan Stanley: neutral, S&P 500 price target of 4,500
Morgan Stanley anticipates a flat stock market in 2024 but notes that certain regions of the market are outperforming others.
The company predicts that the highly narrow leadership of the mega-cap tech stocks will hold through the beginning of 2019 before eventually collapsing.
“The question for investors at this stage is whether the leaders can drag the laggards up to their level of performance or if the laggards will eventually overwhelm the leaders’ ability to keep delivering in this challenging macro environment,” Morgan Stanley said.
“We think these dynamics are likely to persist into early 2024 before a sustainable earnings recovery takes hold (we ultimately see +7% earnings growth next year).”
Morgan Stanley advised investors to steer clear of the expensive tech companies and instead concentrate on conservative growth stocks, which are generally found in the consumer staples, healthcare, and utilities sectors, as well as late-cycle cyclical equities, which are normally located in the energy and industrials sectors.
Stifel: neutral, S&P 500 price target of 4,650
The S&P 500 could grow by less than 2% from current levels, according to market expert Barry Bannister of Stifel, who projects that it would rise in the first half of 2024 before peaking at about 4,650.
According to Bannister, the Federal Reserve won’t lower interest rates in the first half of the year, and mega-cap growth stocks will perform worse than cyclical value equities found in the banking, energy, commodities, and real estate sectors.
“We expect a range-bound S&P 500 in real terms to continue into the early 2030s. Such an environment of reflationary economic growth historically benefits value, small-cap, and international equities, albeit with weaker overall S&P 500 returns than the growth-led 14.1% annualized real total return experienced in the decade 2011 – 2021, a high level of returns that we believe is gone for a generation,” Bannister said.
Goldman Sachs: neutral, S&P 500 price target of 4,700
Goldman Sachs predicts that the S&P 500 will end 2024 a little higher than where it is now because stocks have been trapped in a “fat and flat” range since 2022.
“As higher-for-longer interest rates make valuation expansion from here difficult to justify, our market forecasts are broadly in line with earnings growth. On a weighted basis, we expect 8% price returns and 10% total returns for Global equities over the next year, taking them towards the upper end of the Fat & Flat range that they have been in since 2022,” Goldman Sachs said.
Assuming a recession is avoided, corporate earnings should also be strong in 2019 and support stock prices.
“In the absence of recession, corporate earnings rarely fall. Nevertheless, the lack of strong profit growth and a high starting valuation (particularly in the US equity market), and low equity risk premia leaves an unexciting outlook overall on a risk-adjusted basis, relative to cash returns,” Goldman Sachs said.
NDR: bullish, S&P 500 price target of 4,900
As Chairman Jerome Powell works to steer the Federal Reserve toward a smooth landing, all eyes will be on the institution throughout 2024, according to Ned Davis Research. According to NDR, something has a 70% chance of occurring.
“Lower inflation should allow the Fed to cut rates and the 10-year Treasury to fall toward 3.5%. A soft landing should permit the cyclical bull market to continue. Our year-end S&P 500 target is 4900, about 7% above current levels,” NDR said.
In 2024, NDR projects that the US economy will increase by 1.5% in GDP. However, it cautions that, due to the upcoming presidential election, the first half of the year may be more turbulent than the second. NDR advises investors to monitor cyclical and small-cap firms.
Bank of America: bullish, S&P 500 price target of 5,000
Because of the Federal Reserve’s significant success in tightening its monetary policy after more than a year of aggressive interest rate hikes and the continuous shrinking of its balance sheet, Bank of America is bullish on the stock market in 2024.
“We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted to higher rates and inflation,” Bank of America’s Savita Subramanian said in her 2024 outlook note.
It also helps that investors are still fixated on the possibility of an economic recession and are paying greater attention to negative than positive news.
“We are past maximum macro uncertainty. The market has absorbed significant geopolitical shocks already and the good news is we’re talking about the bad news,” Bank of America said.
RBC: bullish, S&P 500 price target of 5,000
As per RBC’s 2024 prediction, the anticipated gains for 2024 might be mostly attributed to a sustained decrease in the inflation rate. The stock market’s robust 9% surge in November may have carried forward some of the possible gains for 2024, but there’s still more upside to come.
“Implicit in [our valuation] model is the idea that continued moderation in inflation can do most of the heavy lifting to prop up the P/E multiple, something our analysis suggests happened back in the 1970s,” RBC said. “This model has been the most constructive one in our arsenal on the 2023 forecast, and may very well end up being the most accurate if Santa shows up in December instead of the Grinch.”
The Canadian bank continued by saying that although the market may be more unpredictable in the wake of the 2024 presidential election, the S&P 500 has typically gained by about 7.5% during such years.
“What this stat tells us is that any given Presidential election year is a source of uncertainty for the US equity market. Given all of the unusual aspects of the 2024 contest, that seems like an appropriate way to think about the political backdrop for stocks in 2024,” RBC said.
Federated Hermes: bullish, S&P 500 price target of 5,000
The Canadian bank continued by saying that although the market may be more unpredictable in the wake of the 2024 presidential election, the S&P 500 has typically gained by about 7.5% during such years.
“We think that stocks are going to grind higher. They’ve gone from 4100 to 4500. And we think that’s a trend that’s got legs,” Orlando said last month.
Orlando attributed his bullishness to his conviction that interest rate hikes by the Federal Reserve are coming to an end, given that inflation has significantly decreased since its peak.
“The bond market’s done the heavy lifting for [the Fed] since the last Fed rate hike in July. That gives the Fed the luxury, in my view, to step back and say, ‘You know what, we don’t have to hike any more. We can just sit here on the sidelines for the next year and allow the gradual slowing of inflation to occur,” Orlando said.
Deutsche Bank: bullish, S&P 500 price target of 5,100
In light of declining inflation and steady GDP growth, the US economy is headed for a soft landing, which is excellent news for the stock market, according to Deutsche Bank’s 2024 stock market outlook.
Furthermore, the bank stated that even if a recession does occur in 2024, stock prices shouldn’t be significantly impacted because most investors are expecting it.
The bank projects that the S&P 500 would gain almost 10% to 5,100 in 2024. In its bull-case scenario, the gains could nearly quadruple to roughly 19% if the economy avoids a recession.
BMO: bullish, S&P 500 price target of 5,100
Even if an economic slump materializes, the stock market will provide another year of strong gains in 2024 as the second year of the bull market begins, predicts BMO’s 2024 outlook.
According to BMO, the stock market will see more gains in 2019 due to factors like declining corporate profitability, a robust labour market, declining inflation, and declining interest rates.
“US stock market performance and fundamentals in 2023 followed the script in our view to lay the foundation for what we continue to believe will be a path of normalcy for earnings growth, valuation trends, and price performance that is likely to unfold over the next three to five years,” BMO said.
