After a strong 2023 and a smooth start to 2024, many market watchers see stocks taking a breather over the next twelve months, according to Bankrate’s First-Quarter Market Mavens Survey. These professionals see the market rising only 2.2 percent over the next four quarters.
These experts predict that the Standard & Poor’s 500 index will rise to 5,348 from 5,234.18 at the end of the forecast period. It is the fourteenth time in a row that the study has predicted a profit, even if this time it is a small profit. The group also thinks U.S. stocks are poised to outperform international stocks, while they expect growth stocks to outperform value stocks.
“If investors are concerned that the recent break into record territory could put the S&P 500 into nosebleed territory, the relative confidence of survey participants could be seen as something akin to a source of reassurance,” says Mark Hamrick, senior economic analyst at Bankrate.
“Collectively, the outlook for both the coming year and the next half-decade is for more moderate returns, consistent with a methodical and systematic approach to long-term investing,” Hamrick said of the survey results.
These are the key points from the Bankrate survey.
Forecasts and analysis:
This article is one in a series discussing the results of Bankrate’s Market Mavens Survey for the first quarter of 2024:
- Survey: The stock market will rise 2 percent in the next year, experts say
- Survey: market professionals see interest rates on ten-year government bonds stable in a year’s time
- Survey: Experts say the best ways to ride stock market momentum and allocate cash
Stocks will rise in the coming year, professionals say
After stellar performance in 2023 and a strong rally in 2024, the stock market may not have much room to move in the next four quarters, say analysts in the Market Mavens survey. The survey respondents predict that the index will rise only 2.2 percent. On average, they expect the index to rise to 5,348 – up from 5,234.18 at the end of the survey period on March 22.
“Sources of uncertainty abound for the economy and investment environment in the coming months and years, including elections in the US and around the world, geopolitical conflicts and tensions, inflation and monetary policy that we can identify,” says Hamrick.
Analysts remain ambivalent about the five-year outlook for stocks
After the strong market performance of the past fifteen months, professionals surveyed by Bankrate remain ambivalent about how the market will perform over the next half decade, compared to historical returns of around 10 percent per year on average.
- 42 percent say returns over the next five years will be lower than long-term returns.
- 42 percent of respondents said returns will be about the same as their historical average.
- 17 percent said returns will be above historical averages.
Compare these numbers to the results of the previous four Market Mavens surveys, shown below. Analysts gave reasons for their decisions.
“Margins remain strong and are expected to remain that way,” said Dec Mullarkey, managing director of SLC Management, who expects above-average returns. “The labor supply, supported by immigration, helps improve productivity and improvements in technology and AI should help further leverage or improve this in the coming years.”
Others, on the other hand, think the S&P 500’s high valuation will lead to lower future returns.
“Historically high valuations make it more likely that we will experience returns below the historical average over the next five years,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.
“One of the best predictors of stock price returns is starting valuations,” said Michael K. Farr, president and CEO of Farr, Miller & Washington. “At almost 21x forward earnings, the S&P 500 is certainly not cheap. Therefore, we believe it is reasonable to expect lower than average returns over the next five years, especially if interest rates remain high.”
US stocks continue to outperform global stocks, professionals say
While U.S. stocks are often favored by survey respondents, they emerged as a firm favorite this quarter:
- 83 percent of respondents prefer US stocks in the coming year.
- No one prefers international stocks.
- 17 percent said returns would be about the same between the two.
In the fourth quarter, only 50 percent of experts expected U.S. stocks to outperform global stocks, while 33 percent expected similar returns and 17 percent favored global stocks.
The reasons for their preferences varied, but experts routinely cited strong economic and business fundamentals.
“The U.S. should outperform global markets over the next 12 months given the leadership of U.S. companies in driving AI development, pro-growth policies that will be embraced by presidential candidates, and a central bank willing to raise interest rates as necessary to promote a better economy.” growth environment,” said Patrick J. O’Hare, chief market analyst at Briefing.com.
“Our economy is the strongest in the world and it looks like it should remain that way,” said Kim Forrest, chief investment officer/founder of Bokeh Capital Partners.
Mullarkey pointed to several reasons to expect U.S. stocks to outperform, including: “The U.S. technological lead is difficult to match anywhere else. With inflation cooling and interest rates falling, the US is well positioned for growth.”
Meanwhile, others pointed to history in their belief that U.S. stocks would outperform their global peers.
“Election years, greeted by a positive return from the S&P 500 in January, saw a year-over-year average price increase of 15.6 percent, while there was a price increase 100 percent of the time,” said Sam Stovall, chief investment strategist at CFRA Research.
Pros choose growth stocks to beat value stocks
With the US economy looking surprisingly resilient, many experts remain convinced that growth stocks will be the preferred investment over value stocks in the coming year.
- 33 percent of respondents prefer value stocks over growth stocks in the coming year.
- 50 percent prefer growth stocks that outperform value.
- 17 percent think the return will be about the same.
The percentage of respondents favoring growth stocks remained the same compared to the fourth quarter, but the percent favoring value stocks also increased slightly.
“With interest rates expected to remain flat to down and economic growth expected to be modest going forward, we believe growth stocks with their end-market opportunities that have a secular growth profile should continue to outperform growth stocks,” says Brad McMillan , chief investment. officer, Commonwealth Financial Network.
“Value stocks win when they are in a growth phase,” said Forrest, who tapped growth. “We do not yet see value names outperforming traditional growth stocks.”
Others preferred value stocks due to their relatively better valuations.
“Some very large growth stocks are overvalued or so highly valued that they should underperform as a class,” said Charles Lieberman, chief investment officer of Advisors Capital Management.
“Growth stocks have clearly led the market, but if the U.S. economy continues to avoid a recession, value stocks would seemingly offer the best return prospects over the next twelve months as investors weigh their earnings growth potential against their lower valuations.” says O’Hare.
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Bankrate’s Q1 2024 survey of stock market professionals was conducted via an online survey from March 13 to 22. Survey requests were sent by email to potential respondents across the country, and responses were submitted voluntarily through a website. Comments included: Dec Mullarkey, Managing Director, SLC Management; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Hugh Johnson, Chief Economist, Hugh Johnson Economics; Patrick J. O’Hare, chief market analyst, Briefing.com; Charles Lieberman, chief investment officer, Advisors Capital Management; Brad McMillan, head of investments, Commonwealth Financial Network; Michael K. Farr, president and CEO, Farr, Miller & Washington; Marilyn Cohen, CEO of Envision Capital Management; Sam Stovall, chief investment strategist, CFRA Research; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Kenneth Chavis IV, CFP, senior wealth advisor, Versant Capital Management; Chuck Carlson, CFA, CEO, Horizon Investment Services.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
