These stock forecasters have nailed this year’s rally. This is what they see for 2024

By | December 20, 2023

(Bloomberg) — Heading into this year, Wall Street’s top forecasters almost universally expected further pain for the stock market after the disaster of 2022. Only a handful saw a rebound coming.

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It turns out those few were spot on.

A year ago, closely watched forecasters like Marko Kolanovic of JPMorgan Chase & Co. and Morgan Stanley’s Mike Wilson that higher interest rates and an eventual economic downturn would lead to additional losses.

But some ever-optimistic counterparts, including Tom Lee of Fundstrat Global Advisors LLC, John Stoltzfus of Oppenheimer Asset Management and Brian Belski of BMO Capital Markets, predicted a recovery, citing excessive pessimism. Ryan Detrick of Carson Group Holdings LLC expected economic resilience to boost stocks. Meanwhile, Bank of America Corp.’s Savita Subramanian led. a wave of forecasters turning positive mid-year.

“We were talking about the market maybe hitting new highs and people thought we were crazy,” said Detrick, chief market strategist at Carson Group. “But we were surprised by the overwhelming negativity that was there. It is important that people remember that the market has priced in a lot of bad news.”

Read more: Strategists’ S&P 500 Index Estimates for End of 2024

With the S&P 500 Index yet to hit an all-time high, these bulls can claim some vindication after failing to predict last year’s rout. They expect more strength in 2024 as the labor market remains solid and conviction about Federal Reserve rate cuts increases.

Below is a look at how they approached the market in 2023 and their outlook for 2024. Up about 4,768 points as of Tuesday’s close, the S&P 500 is up 24% this year.

Tom Lee, Fundstrat

With a target of 4,750 by the start of 2023, Lee, co-founder and head of research, came closest to predicting the S&P 500’s trajectory among strategists tracked by Bloomberg.

His analysis found that the odds of a 20% rally doubled after the index’s 19% slump in 2022. He saw three key factors: his research showed that inflation would fade faster than most expected; companies were willing to charge higher interest rates given the Fed’s warnings; and volatility was very high.

“It’s impossible for markets to remain at that level of fear, and if inflation subsides – which has happened – then stocks essentially float as the selling pressure ends,” he said.

Lee remains one of the most optimistic forecasters for next year, with an S&P 500 target of 5,200.

Brian Belski, BMO

Going into this year, Belski, the firm’s chief investment strategist, had a 4,300 target for the U.S. stock benchmark, one of the most bullish forecasts among strategists tracked by Bloomberg before he and others upgraded their expectations later in the year to to keep up with developments. the rise of the market.

He viewed market sentiment as excessively negative at the end of 2022, which he said would drive demand for liquidity-driven and “opportunistically oversold” assets.

“Stocks drive profits, which run the economy, and it’s absolutely ridiculous when I hear people say, ‘I’m going to wait, the recession will tell us when to buy stocks.’ No, that won’t happen. Stocks tell you when we’re going to have a recession,” he said. “People have become too formal and stuck in their ways.”

For 2024, Belski expects a resilient labor market, easing consumer price pressures and interest rate cuts in the second half of the year, to drive the S&P 500 to 5,100.

John Stoltzfus, Oppenheimer

Heading into 2023, Stoltzfus, the firm’s chief investment strategist, saw the S&P 500 end the year at 4,400. At the time, his call was one of the rosiest on the street.

The forecaster said the inflation trend was lower and supported sentiment, and while bears found the earnings estimates too optimistic, he called them “right size.”

“Markets became grossly oversold in the process of the 2022 sell-off,” he said. “Bear markets always get oversold, and then it’s recognized that they’re oversold, and some kind of rally happens.”

He remains optimistic, predicting the S&P 500 will reach 5,200 before 2024 is out.

Savita Subramanian, Bank of America

Subramanian, head of US equity and quant strategy, emerged as one of this year’s winners thanks to a mid-year call to turn positive on equities.

Although she entered 2023 with a bleak outlook, with a 4,000 call, she switched to a bullish stance in May, and a wave of sell-off forecasters followed suit. She raised her year-end target for the S&P 500 twice to 4,600.

“It felt like a difficult message to convey to customers,” she said. After the turmoil in the regional banks, “there was a feeling that this was the beginning of the end and that everything would go as it did in 2008.” When it feels difficult to make the call, “those are the times when you’re more likely to be right than wrong,” she said.

Subramanian remains bullish heading into 2024, with a target of 5,000. She sees a soft landing and businesses and consumers will adjust to higher interest rates as stock prices may rise.

Ryan Detrick, Carson Group

Detrick expected the US economy to avoid a recession this year. He also bet that inflation would cool off sooner than the market expected. The strategist added equity exposure during the banking sector turmoil in March and as the S&P 500 fell in October.

“The March sell-off was pretty scary,” Detrick said. “But we said at the time it was just a few bad actors and it wouldn’t be systemic.”

The strategist also doesn’t expect a recession next year and expects some of this year’s laggards – rather than the so-called Magnificent Seven technology stocks – to drive “low double-digit” stock returns. “Small-caps, mid-caps and financials – those are our three favorites.”

–With help from Jessica Menton, Matt Turner, Kate Seaman, and Lu Wang.

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