Oppenheimer’s John Stoltzfus predicts that the U.S. stock market will exhibit a data-dependent behavior until the commencement of the upcoming fourth-quarter earnings season, scheduled to kick off next Friday.

As the robust bull run, which propelled the major indexes to double-digit growth in the preceding year, potentially loses momentum in early January, strategists at Oppenheimer Asset Management anticipate a breather for U.S. stocks at the beginning of 2024.

Led by Chief Investment Strategist John Stoltzfus, the Oppenheimer team highlights the need for traders and investors to evaluate the significant rally in U.S. stocks since October 27. The optimism surrounding potential interest rate cuts by the Federal Reserve in the first half of the year fueled a substantial uptrend in the closing months of a tumultuous 2023.

The S&P 500 surged 11.2% in the fourth quarter, registering a 4.4% increase in December alone, culminating in a remarkable annual gain of 24.2%. This performance marked the best quarter for the large-cap benchmark index since the last three months of 2020.

Stoltzfus and his team emphasize the common occurrence of market pauses following such substantial bull runs and anticipate the stock market to remain “data-dependent” until key market-moving events unfold later in the month. Earnings reports, slated to be released starting next week, are anticipated to provide the necessary catalysts for market conviction.

Major U.S. banks, including JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup, are among the first to report fourth-quarter 2023 earnings.

Despite the potential pause in the stock rally, Stoltzfus expresses confidence that it won’t hinder the S&P 500 from reaching his team’s year-end price target of 5,200, indicating a 9.7% advance from the start of the year at approximately 4,742.

The strategists foresee “further upside” in stock prices throughout 2024, underpinned by fundamental improvements in the stock market. They maintain an overweight position on equities, favoring cyclical sectors over defensive ones.

Additionally, Oppenheimer expects U.S. corporate revenues and earnings to continue growing in 2024, projecting S&P 500 company earnings to reach $240 per share.

While acknowledging the prevailing market conditions, including a forward earnings ratio of 19.6 times for the S&P 500, Stoltzfus and his team remain optimistic about the market’s resilience and growth potential.

The S&P 500 closed at 4,742.83 on the first trading day of the year, and the Dow Jones Industrial Average and Nasdaq Composite recorded mixed performances on Tuesday, finishing at 37,715.04 and 14,765.94, respectively.

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