After an excellent 2023 for stocks, many market analysts see more measured progress in 2024, according to Bankrate’s Fourth-Quarter Market Mavens Survey. They predict that the Standard & Poor’s 500-stock index will rise about 5.5 percent over the next four quarters.
These analysts predict that the S&P 500 will rise from 4,622.44 at the end of the forecast period to an average of 4,878. It is the thirteenth time in a row that the survey has predicted profits in the next four quarters. The experts also continued to favor US stocks over their global rivals, but this time they favored growth stocks over value stocks, in contrast to the third quarter survey.
“The year 2024 brings no shortage of potentially challenging factors that will be associated with the nagging ‘wall of worry’, including whether interest rates and returns match expectations, geopolitical risks and, let’s not forget, the US elections ,” says Mark. Hamrick, Bankrate’s senior economic analyst.
“A recent Bankrate survey found that nearly nine in 10 Americans said handling the economy will be a major deciding factor in casting their vote for president,” he says.
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 fourth quarter of 2023:
- Survey: Stocks will soar 5.5% higher in 2024, professionals say
- Survey: Investment experts see interest rates on ten-year government bonds falling in the coming year
- Poll: Here’s How Experts Think Fed Policy Will Affect Stocks in 2024
According to experts, the stocks are poised to rise in 2024
After a strong first half but a lackluster third quarter, shares rose furiously in the fourth quarter, capping off a strong run for the year. With the S&P 500 nearing the levels it reached a few years ago — just as the Federal Reserve prepared to raise rates — market analysts expect stocks to continue their winning ways in 2024, albeit at a more moderate pace.
Survey respondents predict the index will rise about 5.5 percent over the next four quarters, slightly below the market’s average annual return of about 10 percent. On average, analysts expected the S&P 500 to rise to 4,878 – up from 4,622.44 at the end of the survey period on December 11. Only one analyst expected a decline in 2024, and only a modest one.
Other reasons to be more moderate in their expectations for future profits: Many analysts are still divided on whether the US will experience a recession, with some pointing to high stock valuations.
Experts remain balanced on the five-year outlook
After the market’s run-up in 2023, Bankrate survey experts became more measured on how the market would fare over the next five years compared to its historical performance.
- 42 percent say returns over the next five years will be lower than long-term returns.
- 25 percent of respondents said returns will be about the same as their historical average.
- 25 percent say returns will be above historical averages.
- One analyst did not comment.
That change was a significant shift from the third quarter results, shown below. Some analysts pointed to high valuations, the rise of AI as a productivity enhancer and interest rates as reasons for their stance.
“Given the premise of somewhat rich valuations, with expectations of a recession next year, this means the next five years will deliver lower-than-normal returns,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Sam Stovall, chief investment strategist at CFRA Research, also expects returns below historical levels, pointing to the potential for higher interest rates. “Stock price averages are likely to come under pressure from the onset of a secular bull market for 10-year yields,” he says.
Dec Mullarkey, managing director of SLC Management, on the other hand, expects above-average returns. “Productivity is increasing in the US and breakthroughs in AI and technology should continue to drive this,” he says. “Government commitments such as the Inflation Reduction Act should also attract other capital and help position the US as a leader in sustainable investments and solutions.”
While Patrick J. O’Hare, chief market analyst at Briefing.com, did not provide an estimate of five-year returns, he did say, “The stock market has been a great wealth-generating machine for investors over time. willing and able to weather the inherent volatility – both good and bad – that comes with stock investing.”
Experts still prefer US stocks to global stocks
US stocks were once again the favorite of survey respondents in the coming year, compared to global stocks.
- 50 percent of respondents prefer US stocks in the coming year.
- 17 percent prefer international equities.
- 33 percent said the returns would be about the same between the two.
This quarter’s survey marked a significant shift among those who favored global equities and those who thought the two groups’ returns would be similar in the coming year. By contrast, in the third-quarter survey, 60 percent of analysts favored U.S. stocks, while 27 percent tipped international stocks to outperform and just 13 percent said returns would be the same.
Experts cited many different reasons for their expectations, including inflation and other macroeconomic concerns.
“We are well ahead of other regions in terms of recovery from the corona crisis, now including lower inflation,” said Kim Forrest, chief investment officer/founder of Bokeh Capital Partners, who favors U.S. equities.
“We believe that the sector composition in the US – which is more focused on growth sectors – will allow the country to outperform during the moderate recession that is part of our base case,” says Samana. “Stocks outside the US tend to be more cyclical and export-oriented, both factors that will struggle in a recessionary environment.”
“The lagging effect of previous rate hikes by the Fed and other central banks should become a bigger headwind for global growth in 2024,” O’Hare said. “However, presidential election year promises, eventual Fed rate cuts and inflation relief should allow the US to stand out as the better alternative in a more challenging growth environment.”
Others pointed to higher valuations of U.S. stocks to support their view.
“The U.S.’s superior economic growth and business vitality are offset by significantly higher valuations for U.S. equities,” said Michael K. Farr, president and CEO of Farr, Miller & Washington. He believes U.S. and international stock returns will be similar in the coming years. years ahead.
“Global equities are trading at a steep discount to their relative price-earnings average (versus the S&P 500) and should benefit from an expected depreciation of the US dollar over the coming year,” Stovall says.
We should own growth stocks, say analysts
After favoring value stocks in the third quarter, analysts opted for growth stocks that outperformed in the fourth quarter. Here’s how the results break down:
- 25 percent of respondents prefer value stocks over growth stocks in the coming year.
- 50 percent prefer growth stocks that outperform value.
- 25 percent think the return will be about the same.
It was a significant decline for value stocks, which were favored by 60 percent of respondents in the earlier survey. And it’s a return to form for growth stocks, which were also favored in the first and second quarter surveys.
“Value only works if it can generate growth – so why buy there? Investors are always rewarded for owning growing assets,” says Forrest.
“With inflation normalizing and rate cuts expected next year, both growth and value should perform well,” says Mullarkey. “However, growth stocks tend to perform better when economic growth picks up or recession fears subside. Now that inflation has declined, the likelihood of a soft landing has increased. And as interest rates are cut, the earnings outlook and momentum for growth stocks should accelerate.”
Other market analysts see the potential for value to perform satisfactorily in the coming year.
“Value has dramatically underperformed for a long time as FANG stocks have driven performance,” says Farr, who believes value stocks will outperform growth stocks in the coming year. “We expect performance to improve if the US indeed avoids a recession.”
“We could easily see a year where growth does better in the first half, if a recession happens, and value does better in the second half, as the recovery takes shape,” says Samana, who believes the returns for growth and value stocks will be comparable. .
Methodology
Bankrate’s Q4 2023 survey of stock market professionals was conducted Dec. 1-11 via an online survey. Survey requests were sent by email to potential respondents across the country, and responses were submitted voluntarily through a website. The responses included: Kenneth Chavis IV, CFP, senior wealth advisor, Versant Capital Management; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Patrick J. O’Hare, chief market analyst, Briefing.com; Dec Mullarkey, Managing Director, SLC Management; Kenneth Tower, CEO, Chief Investment Strategist, Quantitative Analysis Service; Clark A. Kendall, CFA, president, Kendall Capital; Sonu Varghese, Ph.D., global macro strategist, Carson Group; Michael K. Farr, president and CEO, Farr, Miller & Washington; Brad McMillan, head of investments, Commonwealth Financial Network; Sam Stovall, chief investment strategist, CFRA Research; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; 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.
