U.S. Stocks Set for a Pause in 2024 Rally, but Wall Street Bull Predicts Higher S&P 500
U.S. stocks are expected to take a breather at the start of 2024 after a strong rally in 2023, according to strategists at Oppenheimer Asset Management. The three major indexes experienced double-digit growth last year, but the bull run may lose steam in early January. However, Chief Investment Strategist John Stoltzfus and his team remain optimistic about the S&P 500’s performance, predicting a grinding higher throughout the year.
Stoltzfus explained, It’s not uncommon for markets to pause to digest a bull run of the magnitude experienced in the fourth quarter just ended. The stock market soared in the closing months of 2023, with the S&P 500 jumping 11.2% in the fourth quarter alone. Overall, it gained 24.2% throughout the year.
The Oppenheimer strategists foresee the stock market remaining data-dependent until more market-moving catalysts emerge later this month, such as earnings reports from major companies. U.S. companies are set to report their fourth-quarter earnings at the end of next week, with banking giants like JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup leading the way.
Despite a potential pause in the stock rally, Stoltzfus does not believe it will prevent the S&P 500 from advancing. He predicts a 9.4% increase from the beginning of the year, with the index potentially reaching around 4,747.
The Oppenheimer team supports their positive outlook by highlighting fundamental improvements in the stock market. They remain overweight on equities, favoring cyclical sectors over defensive sectors. Additionally, they expect U.S. corporate revenues and earnings to continue growing throughout 2024, as evidenced by their projection of the S&P 500’s price-to-earnings ratio expanding toward 21.7 times 12-month forward earnings.
As of Tuesday, the S&P 500 is trading at 19.6 times forward earnings, according to FactSet data. However, market conditions remain mixed, with the S&P 500 down 0.5%, the Dow Jones Industrial Average up 0.2%, and the Nasdaq Composite down 1.6%.
Investors and traders should keep an eye on the upcoming earnings reports and follow the market’s data-driven movements. The stock rally might pause briefly, but the Oppenheimer strategists believe that the S&P 500 has the potential to grind higher, fueled by the positive fundamentals driving the market.
In conclusion, while a breather might be on the horizon for U.S. stocks, Oppenheimer Asset Management anticipates a continued upward trajectory for the S&P 500 throughout 2024. With the market entering the new year, investors will closely observe the data and earnings reports to make informed decisions about their portfolios.
