What is the outlook for financial stocks in 2024?
It is now ahead 10.6% year-to-date in 2024 as concerns over a U.S. economic recession have subsided and investors have shifted their attention to the timing of a Federal Reserve pivot from monetary policy tightening to policy easing.
The market sees a greater than 80% chance of at least five rate cuts from current levels by the end of 2024. Investor optimism about the economic outlook has improved dramatically from a year ago, but there's still a risk that Fed policy tightening could tip the economy into a recession in 2024.
We expect real (inflation-adjusted) U.S. economic growth of about 2% in 2024, higher than our initial estimate of about 0.5%.
The US stock market enjoyed a strong first quarter in 2024, advancing 10%. But inflation was stickier than some expected. In fact, the March CPI number that came out this morning was hotter than expected, too. And that's leading many to question when the Federal Reserve will begin cutting interest rates.
We expect lackluster global earnings growth with downside for equities from current levels.” Against this backdrop, value stocks have a strong chance of outperforming their growth counterparts in 2024.
S&P 500 could hit 6,500 by end-2025, says Capital Economics.
Key Takeaways. While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
The 2024–25 Outlook
We expect growth to rebound to a 2.0 percent pace by 2025Q1 and stay in that range through yearend. On a Q4-to-Q4 basis, real GDP grows by 1.8 percent during 2024 and 2.2 percent during 2025.
The International Monetary Fund (IMF) forecasts a slight decline in global growth to 2.9% in 2024, down from 3% in 2023. However, much of this growth is made up of emerging markets activity, while growth in advanced economies remains tepid.
The S&P 500 has risen sharply in recent months, partly fueled by the view the Fed could soon start cutting rates. The index has hit record highs this year, and is up about 4% so far for 2024 after rising 24% in 2023.
Will 2024 be a bear or bull market?
History says the S&P 500 will rise in 2024, and continue moving higher into 2028. The S&P 500 has barreled through 10 bull markets (excluding the current one) since it was created in 1957. Those events have generally been defined by sustained upward momentum across the index.
The bank's analysts give a positive forecast for the Dow Jones exchange rate in 2024. In their opinion, index quotes will increase by 10% to $40,000 in 2024. If the US economy avoids recession, growth could reach up to 19%. This scenario is more likely due to cooling inflation and stable GDP growth.
Stock prices have surged significantly over the past 18 months. The S&P 500 is up by 45% since it bottomed out in October 2022, while the tech-heavy Nasdaq has soared by a whopping 58% in that time. Investing now, then, means paying much higher prices than you would if you'd bought a year or two ago.
Key takeaways
Expectations of an earnings rebound in 2024 suggest earnings could continue to drive the market higher. While some valuations are stretched, there is still room for the market to grow if earnings estimates are met.
Stock | Expected Change in Stock Price* |
---|---|
Tesla Inc. (TSLA) | 61% |
Mastercard Inc. (MA) | 14.2% |
Salesforce Inc. (CRM) | 7.2% |
Advanced Micro Devices Inc. (AMD) | 11.3% |
Stocks are considered long-term investments. This is, in part, because it's not unusual for stocks to drop 10% to 20% or more in value over a shorter period of time. Investors have the opportunity to ride out some of these highs and lows over a period of many years or even decades to generate a better long-term return.
Traders work on the floor during morning trading at the New York Stock Exchange on March 6, 2024. Despite the heavy concentration of the U.S. market rally in expensive, AI-focused tech stocks, analysts say Wall Street is not yet in bubble territory.
The S&P 500 still has 30% upside between now and the end of 2025, according to Capital Economics. "Our end-2025 forecast of 6,500 for the index is premised on its valuation reaching a similar level to its peak during the dot com mania," Capital Economics said.
To reach 50,000, the Dow wouldn't even need to double — it would require a 31.6% gain from the 38,000 level. If the DJIA companies only earned the current 1.77% dividend yield, it would take 15.6 years for the index to reach the 50,000 mark.
Key Takeaways:
The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
Who keeps the money you lose in the stock market?
No one, including the company that issued the stock, pockets the money from your declining stock price. The money reflected by changes in stock prices isn't tallied and given to some investor. The changes in price are simply an independent by-product of supply and demand and corresponding investor transactions.
Your investment is put into various asset options, including stocks. The value of those stocks is directly tied to the stock market's performance. This means that when the stock market is up, so is your investment, and vice versa. The odds are the value of your retirement savings may decline if the market crashes.
WASHINGTON, DC – Economic growth remains likely to decelerate and ultimately result in a mild recession in 2024, followed by a return to growth in 2025, according to the November 2023 commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group.
Meanwhile, FactSet's consensus estimate for 2024 is growth of 1.2%. Further, Darrell Cronk, president of the Wells Fargo Investment Institute, and his strategists believe the U.S. economy will slow to an annual growth rate of 0.7% in 2024, down from the 2.2% forecast for 2023.
The US now has an 85% chance of recession in 2024, the highest probability since the Great Financial Crisis, economist David Rosenberg says.
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