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After a strong 2023, investors biggest question is whether the stock market rally can continue next year.
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Business Insider has compiled a comprehensive list of Wall Street’s 2024 stock market outlooks.
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From recessions to bull markets, here’s what the top analysts expect for the S&P 500 next year.
After a dismal 2022, stocks soared in 2023, with the S&P 500 and Nasdaq 100 jumping more than 20% and 50%, respectively.
A resilient economy, moderating inflation, and the potential peak in interest rates helped investors overcome fears of a potential recession and jump back into stocks. Now the biggest question investors have is whether the strong market rally can continue into 2024, and is an economic slowdown and subsequent stock market crash imminent.
Business Insider has put together a complete rundown of the top Wall Street forecasts for the stock market in 2024.
From economic recessions to the continuation of the bull market, here’s what Wall Street expects to happen next year.
BCA Research: bearish, S&P 500 price target of 3,300
The S&P 500 could experience its worst crash since 2008 next year as a recession kicks off, according to the 2024 outlook of BCA Research.
“A recession in the US and euro area was delayed this year but not avoided. Developed markets (DM) remain on a recessionary path unless monetary policy eases very significantly. As such, the risk/reward balance is quite unfavorable for stocks,” BCA Research said.
The stock market could avoid such a steep drawdown next year if the Federal Reserve swiftly cuts interest rates, but BCA Research isn’t holding its breath as they don’t expect inflation to fall quickly.
“We remain in the disinflationary camp, but expect that inflation will not slow quickly enough for the Fed and the ECB to cut rates in time to prevent a significant rise in unemployment. Unless a recession occurs imminently or inflation completely collapses, the Fed is unlikely to cut rates before next summer,” BCA Research said.
BCA Research said a recession next year would put the S&P 500 in a range of between 3,300 and 3,700 before an eventual rebound materializes.
JPMorgan: bearish, S&P 500 price target of 4,200
JPMorgan said high equity valuations, high interest rates, a weakening consumer, rising geopolitical risks, and a potential recession give it little confidence that stocks will move higher in 2024.
“We expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed,” JPMorgan’s Marko Kolanovic and Dubravko Lakos-Bujas said in their 2024 outlook note.
“Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lackluster global earnings growth with downside for equities from current levels,” JPMorgan said.
Morgan Stanley: neutral, S&P 500 price target of 4,500
Morgan Stanley expects a flat stock market in 2024, but sees some pockets of the stock market performing better than others.
The extremely narrow leadership of the mega-cap tech stocks is likely to continue early next year, but eventually breakdown, according to the firm.
“The question for investors at this stage is whether the leaders can drag the laggards up to their level of performance or if the laggards will eventually overwhelm the leaders’ ability to keep delivering in this challenging macro environment,” Morgan Stanley said.
“We think these dynamics are likely to persist into early 2024 before a sustainable earnings recovery takes hold (we ultimately see +7% earnings growth next year),” Morgan Stanley said.
Morgan Stanley recommended investors avoid the high-priced tech stocks and instead focus on defensive growth stocks, typically found in the healthcare, utilities, and consumer staples sectors, as well as late-cycle cyclical stocks typically found in the industrials and energy sectors.
Goldman Sachs: neutral, S&P 500 price target of 4,700
Goldman Sachs expects the S&P 500 to finish 2024 slightly higher from current levels as stocks are stuck in a “fat and flat” range since 2022.
“As higher-for-longer interest rates make valuation expansion from here difficult to justify, our market forecasts are broadly in line with earnings growth. On a weighted basis, we expect 8% price returns and 10% total returns for Global equities over the next year, taking them towards the upper end of the Fat & Flat range that they have been in since 2022,” Goldman Sachs said.
Corporate earnings should also remain solid next year, providing a buoy to stock prices, as long as a recession is averted.
“In the absence of recession, corporate earnings rarely fall. Nevertheless, the lack of strong profit growth and a high starting valuation (particularly in the US equity market), and low equity risk premia leaves an unexciting outlook overall on a risk-adjusted basis, relative to cash returns,” Goldman Sachs said.
Bank of America: bullish, S&P 500 price target of 5,000
Bank of America is bullish on the stock market in 2024 because of how much progress the Federal Reserve has made towards tightening its monetary policy following more than a year of aggressive interest rate hikes and the ongoing reduction of its balance sheet.
We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted to higher rates and inflation,” Bank of America’s Savita Subramanian said in her 2024 outlook note.
It also helps that investors remain laser focused on a potential economic recession and is focusing more on the bad news than the good news.
“We are past maximum macro uncertainty. The market has absorbed significant geopolitical shocks already and the good news is we’re talking about the bad news,” Bank of America said.
RBC: bullish, S&P 500 price target of 5,000
The stock market’s strong 9% rally in November may have pulled forward some of 2024’s potential gains, but there’s still further upside ahead, according to RBC’s 2024 outlook.
The main driver behind the expected gains next year could be a continued decline in the inflation rate.
“Implicit in [our valuation] model is the idea that continued moderation in inflation can do most of the heavy lifting to prop up the P/E multiple, something our analysis suggests happened back in the 1970’s,” RBC said. “This model has been the most constructive one in our arsenal on the 2023 forecast, and may very well end up being the most accurate if Santa shows up in December instead of the Grinch.”
The Canadian bank added that while the 2024 Presidential election could add uncertainty to the market, the S&P 500 saw an average gain of around 7.5% in presidential election years.
“What this stat tells us is that any given Presidential election year is a source of uncertainty for the US equity market. Given all of the unusual aspects of the 2024 contest, that seems like an appropriate way to think about the political backdrop for stocks in 2024,” RBC said.
Federated Hermes: bullish, S&P 500 price target of 5,000
Strong underlying trends in the stock market are likely to extend well into 2024, according to Federated Hermes’ chief equity strategist Phil Orlando.
“We think that stocks are going to grind higher. They’ve gone from 4100 to 4500. And we think that’s a trend that’s got legs,” Orlando said last month.
Orlando chalked up his bullishness to his belief that the Federal Reserve is done hiking interest rates, given that inflation has cooled considerably from its peak.
“The bond market’s done the heavy lifting for [the Fed] since the last Fed rate hike in July. That gives the Fed the luxury, in my view, to step back and say, ‘you know what, we don’t have to hike any more. We can just sit here on the sidelines for the next year and allow the gradual slowing of inflation to occur,” Orlando said.
Deutsche Bank: bullish, S&P 500 price target of 5,100
The US economy is approaching a soft landing as inflation cools and GDP growth remains solid, and that’s a great scenario for the stock market, according to Deutsche Bank’s 2024 stock market outlook.
And even if an economic recession does materialize in 2024, it shouldn’t impact stock prices dramatically because most investors are anticipating it, the bank said.
The bank expects the S&P 500 to rise about 10% in 2024 to 5,100, and if the economy dodges a recession, the gains could nearly double to about 19% in its bull-case scenario.
BMO: bullish, S&P 500 price target of 5,100
The stock market will deliver another year of solid gains in 2024 as the second year of the bull market gets underway, even if an economic recession materializes, according to BMO’s 2024 outlook.
Falling inflation, falling interest rates, a strong job market and rising corporate earnings are tailwinds that will drive further upside in the stock market next year, according to BMO.
“US stock market performance and fundamentals in 2023 followed the script in our view to lay the foundation for what we continue to believe will be a path of normalcy for earnings growth, valuation trends, and price performance that is likely to unfold over the next three to five years,” BMO said.
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