2024 Mid-Year Outlook | Wall Street Forecasts for U.S. Equities Amidst a Volatile Macroeconomic Landscape
During the first half of 2024, the U.S. stock markets demonstrated robust performance, achieving several significant benchmarks. The $Dow Jones Industrial Average (.DJI.US)$ briefly reached an unprecedented 40,000 points, while the $S&P 500 Index (.SPX.US)$ experienced a substantial 15% increase, surpassing the 5,500 threshold.
The tech-heavy $Nasdaq Composite Index (.IXIC.US)$ also saw impressive growth amidst AI frenzy, with an 18% jump in value. AI chip-maker $NVIDIA (NVDA.US)$ experienced its own "flippening" moment, with its market capitalization briefly surpassing tech giants $Apple (AAPL.US)$ and $Microsoft (MSFT.US)$, making Nvidia the world's most valuable company, albeit for a very short period.
In the second half of 2024, what should investors focus on in the realm of macroeconomics?
• When Will the Fed Cut Interest Rates?
With several European central banks and the Bank of Canada initiating interest rate reductions, the timing of the Federal Reserve's rate cut has become a pivotal theme in current market. While May's jobs data came in unexpectedly robust, other indicators – including those on inflation, consumer confidence, job vacancies, manufacturing sentiment, credit card spending, and various housing data – collectively suggest a slowing down of economic momentum.
Financial analysts at UBS have predicted an uptick in the global trend of reducing interest rates as the year progresses. "The global rate-cutting cycle is likely to gather momentum in the second half," they stated. Reflecting this sentiment, a significant number of economists surveyed by Reuters expect the Federal Reserve to lower interest rates from the current range of 5.25% to 5.50% by September. Additionally, projections indicate a potential for further reductions before year-end. Presently, the CME FedWatch Tool signals a 65.3% probability that the Federal Reserve will implement a rate cut in September.
• 2024 US Presidential Election
The 2024 United States presidential election, a pivotal contest set for Tuesday, November 5, pits incumbent Democratic President Joe Biden against former President Donald Trump, a Republican stalwart. The candidates' divergent economic policies are poised to create markedly different outcomes for the markets. For instance, Biden's advocacy for green energy contrasts with Trump's support for increased oil and gas exploration within the U.S. during his previous administration.
Analysts from UBS underscore the potential impact of the election on market stability, stating, "The U.S. election is likely to trigger volatility, and we think investors should manage risks accordingly," in their note dated June 20. Recent polls indicate an expanded lead for Trump following the CNN televised debate.
• Has the U.S. Economy Achieved a Soft Landing?
Despite recent data presenting a mixed picture of the U.S. economy, optimism appears to be on the rise regarding its trajectory. A new survey of academic economists has indicated growing confidence in the possibility of a "soft landing" for the U.S. economy. The findings of the poll reveal that 52 percent of participants now expect a recession to be deferred until 2026 or later—a notable increase from the 46 percent who held this view in March.
The operational performance of businesses deserves attention as it can provide indirect verification of economic trends. Analysts on Wall Street forecast an above-average earnings per share (EPS) growth of 11.2% for 2024 and 12.7% for 2025. J.P. Morgan posits that "A more inclusive market rally can be fueled by still respectable nominal GDP growth in the U.S. and a better balance between real growth and inflation."
• Geopolitical Tensions
The future's uncertainty, fueled by geopolitical strife, has instilled a latent apprehension and pressure on the markets. The conflict between Russia and Ukraine has precipitated an unprecedented upheaval in the worldwide commodity trade networks. In addition to numerous disconcerting events, the ongoing turmoil in the Middle East has led to missiles hitting commercial ships traversing a critical maritime corridor.
How Wall Street Forcasts Market Trends in 2024H2?
• Price Target
Supported by tech stocks, Wall Street Institutions have raised their S&P 500 year-end targets, with the highest reaching up to 6,000 recently. Among the optimists, Goldman Sachs has revised its forecast for the S&P 500 Index, setting a new target of 5,600 for the end of 2024, up from the previous 5,200. Evercore ISI has taken an even more bullish stance, elevating its prediction to an impressive 6,000, a sizeable jump from its earlier 4,750 forecast.
Here's the market analysts' forecast for the S&P 500 index target:
• Potential Investment Opportunities to Watch
$JPMorgan (JPM.US)$ Private Bank is bullish on technology, consumer discretionary, healthcare, and industrials for the second half of the year.
The tech sector has the best earnings growth prospects, with mid-teens growth likely over the next several quarters relative to high singledigits for the broad market. The consumer sector should benefit from the end of the inventory overhang that developed as consumption shifted from goods to services during the post-COVID reopening. Healthcare earnings growth is swinging from -20% in 2023 to +8% this year, and the sector can access secular trends such as weight loss drugs (GLP-1s).
$Goldman Sachs (GS.US)$ believes that growth stocks can offer very attractive returns. Beyond AI, they also suggest that portfolios could be diversified with investments in renewable energy innovation and healthcare innovation.
$Citigroup (C.US)$ Wealth maintains that there are still opportunities in semiconductor equipment and cybersecurity software. Additionally, they view technology and healthcare as the two 'super sectors' that will surpass the broader economy in profit growth over the long term."
$Barclays (BCS.US)$ holds a relatively conservative outlook, suggesting that with economic growth slowing and many equity markets at all-time highs, investors should stay defensive and focus on 'alpha' opportunities. At the sector level, they continue to favor the more defensive parts of the economy, such as utilities and consumer staples. Moreover, given the high level of economic and political uncertainty, they also recommend maintaining some exposure to select deep-value cyclical stocks.
Global energy stocks are particularly well positioned in that context, as they trade at a deep discount to history, and offer the best dividend yield amongst the 11 Global Industry Classifcation Standard sectors (4.0% forward dividend yields versus 2.0% for the MSCl All Country WorldIndex). They can also be an attractive hedge against any escalation of geopolitical tensions, rising oil prices and inflation in general.
Source: Barchart, FT, Morningstar, Reuters, JPM, GS, Citi, Barclays
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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