How to Prepare for 2024 Market Turbulence while The S&P 500 Set to Close at 5,200
Below are the newest 2024 S&P 500 forecasts. The S&P 500 price targets range from 4,250 to 5,200. This implies returns of between -8% and +12.5% from the December 11, 2023 close of 4,622. We seem to have survived the worst of the cocaine bear market (when the S&P 500 hit 3,577 in October 2022).
Based on economist predictions, there will be strong income growth (amid cooling inflation and a robust job market). With the expectation that federal rate hikes have delivered their biggest hits to GDP growth in 2022 through 2023, manufacturing is set to recover in 2024.
The key risks to the S&P 500’s performance include consumer sentiment, valuation compression, two wars, and a drawn-out election cycle. The latter of which, will be problematic for the fourth quarter. The market is poised for growth through February with a drop through the third quarter. Market optimists are looking forward to a rebound post-election cycle to close out the year which will increase the chances of a new Bull run.
With the spending-debt spiral increasing, the average American consumer has to hold on with dwindling savings and mounting household debt. The Fed will likely keep interest rate hikes as is through mid-2025 which will keep downward pressure on banks and businesses.
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A Recession in 2024?
The yield curve inversion – which occurs when the 10-year Treasury yields fall below 2-year yields – has “predicted” every recession since 1955. While the yield curve has been a point of conversation since 2019, US economic growth has been much better than expected. A soft landing looks like the most likely scenario for the US economy in 2024.
Financial services company TD Securities places our odds at 65%. I’m placing my bets on no recession or specifically rolling recession.
Those who aren’t invested are likely feeling the pinch of cost inflation. Besides energy services dropping 24.8% (CPI, November 2023), we are living in the age of new prices. Average monthly car payments are up to $729 while average rent is up to $1,500 per month. You are either sitting on equity or a Jenga-house of debt.
As for our TNFG S&P 500 target price, our expectations are resting at 5,000. To compensate, we will be cleaning up our portfolio by shifting away from dividend holdings toward more growth. While our 401ks will stick to life cycle plans, our ROTH IRAs will become more aggressive while favoring the top 10 positions in $VOO.
This is ultimately a plan that has worked for us in the past and will see how to net out positions like Exxon Mobile and $JEPI with some losses and reposition to Nvidia, Amazon, Apple, and Google.
2024 Wall Street Forecasts of the S&P 500
Here are 20 Wall Street S&P 500 forecasts for 2024 segmented by Bearish, Neutral, and Bullish. At least the ones we have access to as of December 12, 2023.
Bearish 2024 S&P 500 Forecasts
- JPMorgan: 4,200 or a drop of 8% (as of Nov. 28) “Absent rapid Fed easing, 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.“ Even as the bank clings to its dour outlook, it sees earnings growth of 2-3% net year, with an earnings-per-share target of $225 for 2024.
- Morgan Stanley: 4,500 implying a 1%-2% drop (as of Nov. 14) “One should note that virtually all of the stock market’s gains this year came from a small number of tech stocks. The rest of the market was largely in a ‘holding pattern,’ unsure of prospects for the economy. This led to a high concentration of index weight in a handful of the largest stocks, something not seen in 50 years.”
- CFRA Research: 4,575, (as of Dec 12) “Let your winners ride: Stocks will climb in 2024 as US skirts a recession”
Neutral 2024 S&P 500 Forecasts
- Goldman Sachs: 4,700 representing a price gain of about 5% and a total return of around 6% including dividends (as of Nov. 20, 2023) “Macro forecasts imply a benign outcome for equities, but the current starting point will limit the potential appreciation for the benchmark US equity index in 2024. Resilient economic growth at the beginning of the year will force the market to push back its current pricing that Fed cuts will begin in the second quarter,” Kostin writes. “US election uncertainty will suppress risk appetite. Later in the year, the first Fed cut and resolution of election uncertainty will lift US equity prices.” Goldman Sach revised their estimate to 5,100 (+7%).
- Comerica: 4,750 (as of Dec. 4)“Fortunately, corporate profits are set to gain traction as we expect market growth to reflect earnings gains. Interest rates suggest little room for P/E multiple expansion. Our base case scenario has the S&P Index fairly valued in the 4,750 range by year-end 2024.”
- Barclays adjusted to 4,800 (as of Nov. 28) “Whether ‘new normal’ or ‘old,’ a roller coaster 2023 proved that this cycle is anything but. We expect US equities to deliver single-digit returns next year as easing inflation is offset by modest economic deceleration.“
Bullish 2024 S&P 500 Forecasts
- Bank of America: 5,000 (as of Nov.29). “The market has absorbed significant geopolitical shocks already and the good news is we’re talking about the bad news. Macro signals are muddled, but idiosyncratic alpha increased this year. We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted (as they are wont to do) to higher rates and inflation.”
- Deutsche Bank: 5,100 or 12 percent higher (as of Nov. 27) “If earnings growth continues to recover as we forecast, valuations will remain well supported around the top of the range as is typical on the pricing in of a pickup in earnings growth. Expect a mild recession for the first half of the year while the forecast indicates +0.6% expansion for the economy“
- Citi Bank: 5,100 suggesting a roughly 10 percent gain from here (as of Dec. 8). “The S&P 500 is poised for solid gains next year on strong earnings growth and a broadening of the stock market’s rally. All told we are positive on U.S. equities premised on improving earnings growth, even as recession risk lingers. Ultimately, this should prove S&P 500 earnings have become less cyclically volatile through time.”
- Oppenheimer and Fundstrat are leaning on +5,200 (interesting): Tommy Lee of Fundstrat did accurately predict 2023.
Where will we ultimately land?
Expert Wall Street strategists are always all over the place with their predictions.
At this point, I'm convinced they merely say things for shock value or one-up each other like an episode of The Price is Right. You can't convince me that their ancestor didn't dance for rain or sacrifice a bit of virgin blood. It's just pure divination at this point due to the volume of retail traders, large whale movements, and boomers retiring from equity positions.
The name of the game is Buy Low and Hold for Dear Life (#HODL), with the implication that Today's Highs are Tomorrow's Lows.
The average S&P 500 forecast for 2024 is 4,750 according to a Bloomberg survey. But I'm holding firm on 5,000 toward the ball drop.
I would love to believe that we are past the shenanigans of the market so we can float to the irrational new Bull cycle. However, no matter how 2024 plays out, long-term investors will always benefit later on. Whenever that later might be. I imagine the US economy like a car on Fury Road. Straight Mad Max and instead of stopping for gas and mandatory maintenance, we are siphoning the future out of the bottom half of society just to fuel today's economy.
Time will tell. But just in case, invest and squirrel away as much as you can for your household.
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