After a Rip-Roaring 2023, the Markets Are Taking a Breather (2024)

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After a Rip-Roaring 2023, the Markets Are Taking a Breather? ›

The stock market's long-term path has been persistently upward, our columnist says, but there have been plenty of setbacks and it's wise to prepare for more. Jeff Sommer writes Strategies, a weekly column on markets, finance and the economy.

Stocks could have a surprisingly strong first half of the year, though the risk of recession may loom in the second half. Watch for opportunities in value stocks and Asia ex-Japan. “Be wary of the human tendency to fight the last war,” the famed investor Barton Biggs once warned.

The consensus 12-month analyst price target for the S&P 500 is 5,614, representing about 6.8% upside from current levels.

Stock Market Average Yearly Return for the Last 10 Years

The historical average yearly return of the S&P 500 is 12.68% over the last 10 years, as of the end of February 2024. This assumes dividends are reinvested. Adjusted for inflation, the 10-year average stock market return (including dividends) is 9.56%.

It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in the long term.

Most major indexes were able to erase their losses from a dismal 2022. Smaller company stocks had a late rally, but managed to erase the bulk of their losses from last year. The Russell 2000 index finished 2023 with a 15.1% gain after falling 21.6% in 2022.

There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.

While there could be a growth slowdown in the first half of 2024, experts believe growth should resume in the second half of the year. Americans faced many financial challenges this year, from persistent inflation to increasingly expensive debt.

Yardeni Research president Ed Yardeni has a 5,400 target for the end of 2024 but sees the benchmark hitting 6,000 in 2025 and 6,500 in 2026. To Yardeni, continued outperformance from the US economy, and an increase in productivity, will drive the upside in stocks.

Will market improve in 2024? ›

Stock Market Forecast 2024: Wall Street Price Targets

Growth is expected to improve in 2024. Analysts are calling for year-over-year earnings growth of 11.5%, Butters says. But not all of Wall Street is convinced.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

All you do is divide 72 by the fixed rate of return to get the number of years it will take for your initial investment to double. You would need to earn 10% per year to double your money in a little over seven years.

On a quarterly basis, the S&P 500 reported earnings declines of -1.7% and -4.1% for the first quarter and second quarter of 2023. However, the index had earnings growth of 4.9% in Q3 and is projected to report earnings growth of 2.4% for the fourth quarter, per FactSet estimates. Growth is expected to improve in 2024.

Investec in its latest India strategy note said the probability of a correction (10 per cent drawdown) for domestic stocks is high in 2024, especially after the outperformance of large cap (23 per cent) and midcap (58 per cent) indices over the past year. The probability, it said, is close to 90 per cent!

Global growth will remain moderate

Global growth is projected to be 2.9% in 2023, and weaken to 2.7% in 2024. As inflation abates further and real incomes strengthen, the world economy is projected to grow by 3% in 2025.

A “steamy” economy should lead to strong profit growth, and healthy earnings will be needed to keep the market rising. Big Money participants forecast a 12% jump in earnings per share for the S&P 500 in 2024, slightly ahead of consensus forecasts for an 11% increase.