Many of the themes that drove stocks higher in 2023 should persist in the new year
At the end of every year, I make a list of big stock market predictions for the upcoming year.
But before I do, I also like to review my predictions from the previous year to help inform my outlook.
And as it turns out, my predictions for 2023 were pretty spot-on.
Last year, I published 10 big stock market predictions for 2023. All 10 were pretty bold and controversial – and nine ended up proving true.
I said:
- Inflation would crash much faster than everyone thought – it did.
- The Fed would pause its rate-hiking campaign – it did.
- The economy would avert a recession – it has.
- Stocks would soar in the back half of the year – they did.
- The S&P 500 would rise at least 20% – it did.
- The Nasdaq would rise at least 30% – it did.
- Bitcoin would soar – it did.
- Housing stocks would stage a big rebound – some did.
- Certain high-growth AI tech stocks would rise 1,000% – some have.
The only prediction that didn’t come to be was my belief that small-cap stocks would outperform large caps. Instead, the AI Boom of 2023 lifted large-cap tech stocks to their highest levels in recent memory.
So, in that respect, I’m happily beat. And I’ll gladly take that 90% accuracy rating.
Now, with that in mind, I’m making 10 big and bold stock market predictions for the upcoming year. And I’ll publish them within the next few issues of Hypergrowth Investing over the coming days.
Today I’ll share my first four stock market predictions.
Let’s dig in.
Stock Market Predictions for 2024
1: The S&P 500 Will Rise at Least 15%
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% next year.
2: Growth Stocks Will Keep Dominating
Growth stocks absolutely crushed it this year, 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.
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.
The Final Word
As you can see, I’m exceedingly bullish on the stock market outlook for 2024. And I think that many of the themes that drove stocks higher in 2023 – rate cuts, AI, etc. – will persist in the new year.
One small wrinkle? I think small- and mid-caps will finally shine as the mega-cap tech stocks take a bit of a breather next year.
Stay tuned for more big stock market predictions for 2024!
And if you’re hoping to get prepared for the incoming gains, get my latest and greatest stock picks to prosper in the new year.
