- Wednesday, October 16, 2024
The U.S. stock market is expected to take a break at the beginning of 2024, with analysts at Oppenheimer Asset Management indicating that the bull run, which saw strong double-digit growth across the major indexes last year, may lose momentum in early January.
According to a team of strategists led by John Stoltzfus, Chief Investment Strategist and Managing Director at Oppenheimer, it is not surprising that traders and investors are reassessing the recent market movements. The significant rally in stocks since October 27th is prompting a need for evaluation.
In 2023, the stock market experienced impressive upward momentum after a roller-coaster ride. Growing optimism surrounding potential interest rate cuts by the Federal Reserve in the first half of the year contributed to this surge. The S&P 500 index skyrocketed by 11.2% in the fourth quarter, with December alone showing a 4.4% increase. This resulted in a yearly gain of 24.2%, marking the index's best quarter since the final months of 2020.
According to Stoltzfus and his team, it is not unusual for markets to pause after such a significant bull run. They suggest that the stock market will remain "data-dependent" until additional market catalysts arrive later in the month. Earnings reports are expected to provide further confidence and fuel conviction, especially as the S&P 500 hovers just below its record high set almost two years ago.
US Companies to Report Q4 2023 Earnings
US companies are set to report their earnings for the fourth quarter of 2023 starting at the end of next week. The nation's largest banks, including JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup, will be the first to announce their earnings.
Positive Outlook for the Stock Market
Despite a potential pause in the stock rally, strategists believe that it will not hinder the S&P 500 from achieving their price target of 5,200 by the end of 2024. This target suggests a 9.4% increase from the S&P 500's trading value at the beginning of this year, which was around 4,747.
Fundamental Improvements Driving Stock Market Growth
The strategists express optimism regarding further upside potential in stock prices for this year. They attribute this positive outlook to fundamental improvements in the stock market. Their preference lies with cyclical sectors over defensive sectors, and they maintain an overweight position on equities.
Projected Growth in Corporate Revenues and Earnings
Oppenheimer anticipates continuous growth in US corporate revenues and earnings throughout 2024. They project that earnings for S&P 500 companies will reach $240 per share. Additionally, they expect the price-to-earnings ratio for the index to expand towards 21.7 times 12-month forward earnings in 2024.
Current Stock Market Conditions
As of Tuesday, the S&P 500 is trading at 19.6 times forward earnings. Meanwhile, US stocks display a mixed performance, with Treasury yields experiencing a slight increase. The S&P 500 dipped by 0.5% to reach 4,747, while the Dow Jones Industrial Average rose by 0.2% to 37,764. The Nasdaq Composite decreased by 1.6% to 14,773, according to FactSet data.
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