The S&P 500 is set to hit an all-time high in 2024 as the U.S. avoids a recession, according to Bloomberg's latest Markets Live Pulse survey, although weaker consumers mean the index will rise less than its 20% gain this year.
The median of 518 respondents expects the S&P 500 to climb to 4,808 next year, surpassing the previous high of 4,797 set in January 2022, and the 10-year Treasury yield to fall to 3 from a high of 5% this year8%。
More than two-thirds of respondents said they do not see a hard landing as the biggest risk to the market, with most expecting the Fed to start cutting interest rates by July.
Aneeka Gupta, head of macroeconomic research at Wisdomtree, said: "American exceptionalism remains entrenched. Key drivers are a more favourable U.S. economic backdrop relative to China and Europe, improved earnings expectations, and lower valuations for the S&P 500. ”
The optimistic outlook contrasts sharply with expectations at the start of the year, when investors feared a hawkish Fed and the specter of a US recession, which prepared them for volatile markets. But the U.S. economy has weathered pessimistic expectations, the labor market has remained resilient, and U.S. corporate earnings** have been faster than expected.
Top Wall Street strategists, including Deutsche Bank AG and RBC Capital Markets, also say the U.S. will hit a record high next year, as they say the S&P 500 has now adapted to a higher interest rate environment.
Not everyone is so optimistic. Bank of America CorpWhile the pullback in yields in recent months has certainly driven ***, a further drop in yields to around 3% next year would mean a weaker economy, which would eventually drag you down, said strategist Michael Hartnett. In fact, about 33% of survey participants said they expect burnout consumers to be the biggest risk next year.
Moreover, the median value of the survey, while at a record high, is only about 4% above the current level of the S&P 500. Data compiled by Bloomberg shows that this increase is much lower than the average 19% increase in the index** year. This level is also below the intraday all-time high of 4,819 points.
Richard Flax, chief investment officer at Moneyfarm, a European digital wealth manager, said: "We see some tension between a possible rate cut and **. We're leaning towards a situation where growth is slowing down and we're seeing earnings downgrades in some companies. This makes us a little cautious about 2024. ”
For Goldman Sachs Group IncThe ideal course of action is to maintain an investment in ** and avoid selling ** during volatile times. Markets Live Pulse participants plan to follow this advice, with 26% saying they will increase their holdings of U.S. Treasuries in the next month, which is higher than the average for the survey. The survey began in August 2022.
The U.S. is also expected to maintain its safe-haven appeal, with 43% of respondents saying the U.S.** will continue to outperform international peers in 2024. This is to be expected, as the S&P 500 has outperformed the world for eight of the past 10 years**.
But at Apple Inc), Tesla Inc) and Nvidia CorpAfter seven big tech stocks dominated the market for much of 2023, investors are turning from small-cap stocks to value stocks in search of bargains.
Santi Kelemen, chief investment officer at M&G Wealth, said: "We don't expect the Magnificent Seven** rally to last long. Valuations in other areas of the U.S. market are much more attractive. As companies in more traditional industries adopt AI, it is possible to increase productivity. ”
When asked what the biggest bargain will be next year, the overwhelming majority of respondents to Markets Live Pulse point to emerging markets outside of Greater China. Hong Kong's benchmark Hang Seng Index is set to set a record fourth consecutive year** in 2023 and is likely to continue to lag next year. At the same time, around 5% is expected.