Stocks haven’t had the best start to this new year.
But don’t let that scare you. Most often, the first trading day of a new year tells us very little about how the rest of the year will go.
In fact, for the past few years, the new year’s first trading day has been a great contra-indicator for stocks’ upcoming performance.
Stocks dropped on the first trading day of 2021. Then the market went on to rally 27% that year.
In 2022, stocks rallied on the year’s first trading day. And that year, the market crashed 20%.
Then in 2023, stocks dropped on the first trading day of the year. Thereafter, the market soared almost 25%.
In other words, don’t read too much into yesterday’s stock market selloff. We’re confident it doesn’t mean a thing.
In fact, from a fundamental and technical perspective, following a brief pullback in January, stocks look positioned to soar in 2024.
That’s actually one of my 10 big stock market predictions for 2024.
See; at the end of every year, I like to make a list of my biggest predictions for the financial markets in the upcoming year.
Last year, I went 9 for 10, including correctly calling for a >20% rally in the S&P 500 and a >30% rally in the Nasdaq.
Not too shabby.
But this year, I’m aiming to bat 1,000.
Let’s take a deeper look at my stock market predictions for 2024.
1: The S&P 500 Will Rise at Least 15% in 2024
Over the past 12 months, the economy has proven impressively resilient. And as a result, so have corporate earnings estimates.
Current 2025 earnings estimates are around $270 per share. We think that strengthening economic momentum in 2024 will push those estimates higher throughout the year. And by the end of the year, 2025 earnings estimates will likely be north of $280 per share.
We also believe that stock market valuations should stabilize around their multi-year averages, which is about 19X forward earnings. A 19X forward earnings multiple on 2025 EPS estimates of $280 implies a 2024 price target of 5,320 for the S&P 500. That’s about 13% higher than where the market currently trades.
And in bull markets like this, stocks tend to trade slightly above fair value. That’s why we think the whole market will rally at least 15% in 2024.
2: Growth Stocks Will Keep Dominating
Growth stocks absolutely crushed it in 2023, broadly soaring about 50% of the time while value stocks rose a measly 5%. And we’re confident that this trend will continue in 2024.
That’s because interest rates should move lower as the economic outlook improves – two major macroeconomic dynamics that strongly favor growth stocks. Plus, it’s also worth noting that the U.S. economy will likely pull off a soft landing in 2024, wherein interest rates move lower but economic activity remains positive.
The U.S. economy has achieved four such soft landings before. And every time, growth stocks meaningfully outperformed value stocks. Growth will likely remain the winning trade in 2024.
3: The AI/Tech Theme Will Remain the Hottest on Wall Street
Artificial intelligence (AI) was the hottest theme on Wall Street this year. And we expect that will remain true next year, too.
It’s clear to us that we are in the first few innings of the AI Boom. The best analog? The dot-com boom. That period lasted from 1991 to 2000, almost an entire decade. And this AI Boom is just wrapping up its first year, which suggests there are still several years left in this boom.
And we believe that over the next few years, AI will continue to proliferate across and transform the global economy. And AI stocks should remain the best performing stocks on Wall Street.
We are particularly excited about AI software, PC, server and robotics stocks for 2024.
4: The Stock Market Rally Will Become Increasingly Broad
The 2023 stock market rally was very narrow. Basically, the large-cap tech stocks soared this year while everything else struggled. And the data supported that reality – until this end-of-year rally.
The holiday rally that has washed across Wall Street over the past two months has been exceptionally broad and widespread. For example, the S&P 500 Equal-Weight Index cycled from 52-week lows to 52-week highs in just 33 days – the second-fastest low-to-high rally that index has posted in 50 years.
Given this price action, we think that the stock market rally is finally broadening out. And as interest rates fall and the economic outlook improves in 2024, the rally should continue to get significantly wider.
Small- and mid-cap stocks will play “catch-up” to their large-cap peers next year. Keep an eye out for small-cap opportunities.
5: Bitcoin Will Hit $100,000
Cryptocurrencies are, frankly, quite predictable. Every four years, there is a Bitcoin halving event where the supply of new Bitcoin released per transaction is cut in half. Between these halving events, cryptocurrencies tend to struggle.
However, around the time of these events, they typically experience a surge. Specifically, cryptocurrencies start to climb approximately 12 months before a halving and continue to rise until 12 months after the event. The fourth Bitcoin Halving is scheduled for April 2024. In line with previous patterns, cryptocurrencies began their ascent in early 2023, roughly 12 months prior to the fourth halving. This pattern seems to be persisting.
Consequently, it appears increasingly likely that cryptocurrencies will continue to surge into the halving and for 12 months following it. This suggests that the crypto markets will maintain their momentum until at least early 2025.
Our fundamental analysis indicates that, during this rally, Bitcoin will reach $100,000. We are very optimistic about cryptocurrencies and crypto stocks for 2024. Moreover, for what it’s worth, we also accurately predicted the bottom in BTC in late 2022 and the significant rally in 2023.
6: The Housing Market Is Poised for a Boom
Over the past two years, the housing market has struggled due to fluctuating mortgage rates, which cycled from a 20-year low of 2% in 2021 to a 20-year high of 8% in 2023. However, this major headwind is now reversing. Mortgage rates have fallen sharply in the past two months, from 8% to 6.5%, as the Federal Reserve signaled an end to rate hikes and readiness to begin cutting rates. The market anticipates that the Fed will start reducing rates in March 2024 and continue into 2025.
Historically, mortgage rates have plummeted each time the Fed has cut rates. Consequently, we can expect a significant drop in mortgage rates in 2024. These lower mortgage rates are likely to reinvigorate homebuying demand that has been on the sidelines and unlock existing housing supply.
In 2024, the housing market is projected to experience a significant rise in both demand and supply. Typically, when supply and demand in a market both increase substantially, the market experiences a boom. Therefore, we foresee a housing market boom in 2024.
7: The Solar Industry Will Majorly Re-Heat
Alongside the housing market, the solar industry was hit hard by rapidly rising interest rates in 2023. Most solar projects are financed, and the high rates made them increasingly unaffordable last year.
Despite this, there remains an enormous demand for solar energy, coupled with substantial legislative momentum supporting the build-out of solar infrastructure. Therefore, once rates decrease in 2024 and affordability improves, we will likely witness a surge of backlogged demand reentering the solar market. As such, we anticipate a substantial rebound in the solar energy industry in ‘24.
8: Nuclear Stocks Will Go Nuclear
Nuclear energy has experienced an enormous resurgence over the past 24 months. Countries are reopening shuttered nuclear power plants and planning new construction, driven by the volatile geopolitics that underscore the unreliability of fossil fuels.
High interest rates have also made new solar and wind construction prohibitively expensive. The global consensus seems to be shifting from “nuclear is bad” to “nuclear energy will be an essential part of a future energy mix.” We believe this shift is entering its third year of what will be a 10- to 15-year trend.
Consequently, nuclear stocks, which were very strong performers in 2023, are expected to continue their strong performance in 2024.
9: The Consumer Will Keep the Economy Strong
I am very bullish on the U.S. consumer in 2024.
The headwinds that depressed consumer sentiment and spending in 2022 and ‘23 are reversing, poised to become tailwinds in 2024.
Inflation has returned to “normal,” and commentary from leading retailers suggests that the recent streak of steady price hikes is over.
Meanwhile, wage growth has steadily outpaced inflation since May 2023, a trend that should continue throughout 2024. This should help rebuild savings accounts and boost consumer confidence. Interest rates are also expected to fall in 2024, making big-ticket purchases more affordable and accessible.
All these factors combined suggest a potential explosion in consumer spending this year. We are very bullish on consumer stocks in 2024.
10: The AI Chips Market Should Stay Red-Hot – But Nvidia Will Cool Off
The AI chip market grew exponentially in 2023 as companies worldwide rushed to acquire next-gen chips for building AI applications.
Most of this AI chip “gold rush” centered around Nvidia, the most capable general-use AI chipmaker. However, we are witnessing a significant shift in the AI market toward building custom AI applications that require custom AI chips – an area where Nvidia does not dominate.
The Final Word on My Top Stock Market Predictions
Those are my 10 big predictions for 2024.
And if I’m right, 2024 could very well be one of the best years to make money in the stock market since the late 1990s.
