We will soon see the impact of Nvidia’s earnings on the market, as these figures have influenced bond yields and the S&P 500 in the past.
A lot of investors may have made incorrect predictions about the market this year, preparing for an economic downturn that did not occur. This also applies to Wall Street strategists, who are expected to be off-target with their end-of-year predictions for the S&P 500.
Société Générale stands out from the rest as the S&P is currently 4% below the bank’s target of 4,750, a target they plan to achieve by 2024.
Swiss bank strategists are forecasting a significant year ahead and advise preparing to take advantage of a dip in the market as the S&P 500 is expected to reach its lowest point for this cycle. They anticipate around 150 basis points of rate cuts by the Federal Reserve, a slowdown in GDP growth, and better understanding of the political cycle by the end of 2024. This information comes from analysts Manish Kabra and Charles de Boissezon.
This is how they plan for the year 2024, breaking it down into four quarters.
A1) The S&P 500 has seen an increase in value due to a decrease in bond yields. Additionally, the global economic situation is improving, and the index continues to have more favorable earnings when compared to the previous year.
“The most challenging period characterized by a noticeable decline in consumer activity and increasing political uncertainty.”
The third quarter has been challenging due to a decrease in earnings and increasing political uncertainty, despite the Federal Reserve making more significant cuts. To boost the S&P 500 index, it will require broader gains since the Nasdaq-100 earnings comparisons have become more difficult. However, these gains are not expected to materialize immediately.
After the conclusion of the U.S. elections, there is an advantage for reshoring stocks, and the market breadth begins to show signs of improvement as attention shifts towards robust growth.
What is the investor strategy for this situation? They provide four predictions for U.S. stocks in the coming year.
Purchase the decline in the S&P 500. The arrival of better leading indicators for profitability will create chances for buying, although the year ahead will not be without challenges. There is expected to be a slight recession in the middle of 2024, a credit-market selloff in the second quarter, and ongoing reduction in quantitative easing measures.
The long equal-weighted version of the Nasdaq-100 compared to the Russell 2000 is a good option for investors who want to gain exposure to big-cap growth and earnings momentum through a more diversified index. Despite a recent increase in small-cap stocks, SocGen is pessimistic due to a large number of companies refinancing and experiencing losses. The First Trust Nasdaq-100 Equal Weighted Index Fund follows this index.
There has been a significant increase in the reestablishment of U.S. stocks. Ever since the Inflation Reduction Act came into effect, over $500 billion in fresh investments have entered the market, and stocks related to reshoring have performed exceptionally well in the industrial sector, regardless of whether it was during the Trump or Biden administrations. Two notable exchange traded plays in this area are the Transform Supply Chain and ProShares Supply Chain Logistics. Additionally, there are several other American Revival stocks that focus on this theme and can be considered for investment.
Societe Generale predicts a strong growth in the global generative AI market, with an estimated compound annual growth rate of 31.4% from 2023 to 2032. Nvidia’s impressive performance this year, with a rise of approximately 244%, has emphasized the significance of AI in the eyes of investors. For those interested in investing in this sector, options include Cathie Wood’s ARK Autonomous Technology & Robotics ETF and the iShares Robotics and Artificial Intelligence Multisector ETF.
