QVMM - How High Can Stocks Go In 2024?
2024-03-19 12:20:00 ET
Summary
- Rising liquidity, a resilient economy and strong household balance sheets have supported corporate earnings and stocks over the past year.
- And, while the leading indicators of the business cycle suggest a rebound in growth is likely later in 2024, the stock market has largely priced this in. As such, we should see a rotation out of growth/tech and into real economy sectors and hard assets moving forward.
- While the jobs market is treading between hard landing and soft landing, inflation continues to be sticky and should limit the levels of rate cuts the Fed can undertake in 2024. Markets may be to reprice to this dynamic.
- Although liquidity has been supportive of risk assets in recent times, stocks have also become richly priced relative to underlying liquidity, which itself could turn less favourable toward risk assets in Q2.
- In addition, stock market internals continue to trend unfavourably, and are suggesting the market is in need of some kind of pull-back and/or consolidation before moving higher.
A positive backdrop for stocks, but risks remain
The stock market has been on a tear since the latter stages of 2022. No question. The 25% rally in the S&P 500 since October is testament to this. With crypto booming and speculative furore back to levels not seen since 2021, it seems likely the easy money has been made, at least for now. Thus, at times like this it is well worth stepping back and objectively assessing how high the stock market can actually go in 2024.
One of the dynamics whose footprints are all over the positivity in equities for much of the past year has been the resilience in the US economy. While I have been expected to see some kind of slowdown in coincident economic activity at the turn of the year, no such material slowdown as occurred....
How High Can Stocks Go In 2024?