As the S&P 500 reaches an unprecedented 5000, global price drops might allow central banks to reduce interest rates.
Many have underestimated the impact of current economic uncertainties. On November 27, 2023, PRNewswire announced that the anticipated 2023 crisis did indeed occur. Inflation peaked in late 2022, with disinflation continuing throughout 2023 despite better-than-expected economic performance. BofA Global Research experts, in their 2024 outlook, predict ongoing disinflation and foresee the Federal Reserve and European Central Bank beginning rate cuts by mid-year. Although a soft landing is expected instead of a recession, the rate hikes over the past 18 months are anticipated to slow growth and increase unemployment.
Candace Browning, Head of BofA Global Research, remarked, “2023 defied almost everyone’s expectations: recessions that never materialized, rate cuts that didn’t happen, and bond markets that only rebounded in sharp, brief spurts.” She added, “Despite downside risks, we expect 2024 to be the year when central banks can achieve a smooth landing.”
Sector and Market Predictions for 2024
Global Economic Outlook
Claudio Irigoyen, Head of Global Economics, foresees a gradual decline in global inflation, allowing central banks to reduce rates by the second quarter of 2024 and possibly preventing a global recession. Michael Gapen, Head of U.S. Economics, anticipates a 25 basis point cut per quarter throughout 2024, starting with the Fed’s initial rate cut in June.
Chief Investment Strategist Michael Hartnett predicts 2024’s bull markets will be driven by bonds, gold, and breadth, transitioning from bearish investor positioning and recessionary corporate profits. Savita Subramanian, Head of U.S. Equity and Quantitative Strategy, remains optimistic about equities, citing corporate adaptations and the Fed’s achievements. The S&P 500 is projected to reach a new high of 5000 by the end of 2024, driven by EPS acceleration and reshoring initiatives.
Commodities and Emerging Markets
Brent crude is expected to stabilize at $90 per barrel, with OPEC+ continuing to limit supply through 2024. Francisco Blanch, Head of Commodities and Derivatives Research, forecasts a 1.1 million barrels per day increase in oil demand, while Brent and WTI prices should average $90 and $86 per barrel, respectively. Gold supply is predicted to rise, and industrial metals restocking is anticipated as interest rates decrease.
In Japan, consumer spending and prices are expected to continue rising, benefiting from corporate reforms. Emerging markets show promise with price reductions and a strengthening U.S. dollar, and China’s economic expansion is projected to stabilize.
Credit Markets and Fiscal Challenges
Credit strategists recommend focusing on quality investments, with investment-grade credits offering the best risk-reward. High yield and low carry rates make loans more attractive, though high yield credit losses may not be as minimal as loans. Slowing investment spending is impacting U.S. economic progress, with fiscal stimulus effects waning. Despite a forecasted slowdown in consumption, no recession is expected.
The U.S. fiscal position has worsened, with increased duration/inflation risk, potentially keeping the 10-year Treasury yield elevated. Global elections could introduce additional uncertainty, influencing market dynamics.
Global Research Excellence
BofA Global Research, renowned for covering over 3,500 stocks and 1,250 credits globally, consistently ranks among top research firms. Recognized by Institutional Investor magazine and other industry surveys, the group’s comprehensive analysis supports strategic decision-making across financial markets.
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