Economist Jeremy Siegel has predicted an 8-10 percent gain for the S&P 500 in 2024, suggesting that the index has the potential to reach the 5,300 level.
“My outlook for the S&P 500 for 2024 is another good year—in the order of 8-10 percent price gain—and I think value stocks, particularly smaller-cap value stocks, trading at much lower multiples could do better, with around 15 percent appreciation,” Siegel said in his WisdomTree weekly commentary note.
This optimistic projection comes after a period of profit-taking in tech stocks at the beginning of the year.
"No one wanted to pay capital gains tax in 2023, so those looking to reduce tech exposure delayed sales until 2024. We saw that in our own team’s model portfolio trades," Siegel said.
Analyzing recent economic data, Siegel described the current state of the US economy as moving at a "Goldilocks" pace.
“The data is not too strong to encourage the Federal Reserve (Fed) to tighten and certainly not too weak to start a slowdown in corporate profits," he said.
Also Read: Nouriel Roubini’s unexpected optimism offers glimmer of hope for global economy in 2024
However, Siegel also emphasized the need for caution, pointing out that the recent labour market report, while positive, had some nuances.
"The unemployment rate came in 0.1 percent under expectation, matching the previous month. But hours worked dropped 1/10th of an hour—and that is enough to offset more than all of the jobs created—meaning total hours worked actually declined. So, the report was not quite as strong as some media reported," Siegel noted.
Wage increases
Addressing concerns that triggered a selloff in bonds, Siegel delved into the aspect of average hourly earnings exceeding expectations. He challenged the notion that rising wages are inherently inflationary, saying, "The gap between wages and inflation is productivity growth, and productivity growth has been extremely robust."
Looking ahead, Siegel considered various factors that could influence inflation, such as the conflicts in West Asia impacting oil prices. However, he noted, "So far, these tensions are only impacting oil, and we see no signs in other commodities which have been stable, if not declining."
Also Read: Peter Schiff raises alarm as US National Debt skyrockets, predicts record increase in 2024
In terms of monetary policy, Siegel disagreed with the expectation of multiple rate cuts in 2024, focusing on Fed Chair Jerome Powell's flexibility.
"If real economic growth stays strong, the Fed could keep rates exactly where they are, and we could have strong equity markets," he said. "Powell’s flexibility means we should avoid the worst case of an overly stubborn Fed, lowering the probability of a recession and raising chances of continued growth or a softer landing."
Siegel's insights offer a comprehensive outlook on the economic landscape and the S&P 500's potential in 2024. Investors are advised to consider these factors as they navigate the dynamic market conditions throughout the year.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.