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The Stock Market Rally Could Extend in 2024

The S&P 500 experienced a great run throughout 2023 gaining more than 24%. The index has finished the year on a positive note and is just 25 points away from its 3 rd of January 2022 all-time high of 4,818. The Dow Jones Industrial Average and the Nasdaq 100 have gained 13% and 44% respectively in 2023 and have both posted fresh record highs.

After a brutal sell off in 2022, U.S. equity markets had a remarkable recovery in 2023 despite a widely expected recession, which never came. The U.S. economy managed to fare well amid rising interest rates and persistently high inflation thanks to the resilience of U.S. consumers. The $5 trillion fiscal stimulus injected into the economy during the Covid pandemic has led to excess savings putting consumers in a much stronger position than expected.

A graph of stock market

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Source: TradingView

Many economists were expecting the interest rates increases which started in March 2022 to hit the consumer and businesses faster than they actually did and push the U.S. economy into a recession. However, both consumers and the corporate sector were more robust than they have been in previous hiking cycles and fared well in 2023.

It was widely expected that the higher interest rates would affect business activity and would lead to an increase in the unemployment rate. Instead, leisure and hospitality – the hardest hit sectors during the Covid pandemic were still recovering in 2023, which kept the labour market resilient. Strong wage growth and a rising labour force participation have been supporting consumer spending last year. Unless the labour market weakens and the consumer steps back a recession in the U.S. economy is unlikely.

As we enter 2024 economists appear divided in regard to whether a mild recession is coming in the year ahead or not. Investors are certainly worried about the lagging effects from the Fed’s tightening campaign, which could prompt companies to lay off workers and push the unemployment rate higher. Signs of a gradual economic slowdown and possible consumer spending weakening due to depleting excess pandemic cash balances, could trigger a deep pull back in the equity market.

Investors’ expectations of rate cuts by the Federal Reserve in 2024 propelled equity markets higher in 2023. Interest rates futures imply an 85% chance of a rate cut as early as March, with the market now expecting about 155 basis points of easing in 2024. However, the U.S. central bank is likely to maintain the federal funds rate within the current 5.25 – 5.50% range until an economic slowdown exerts further downward pressure on inflation, avoiding premature rate cuts that could delay inflation moderating to its target of 2%.

Despite the current macro backdrop, a pivot in both the economic cycle and the Federal Reserve policy is likely around the beginning of the second quarter. Disinflation is likely to continue to build momentum combined with a moderate economic slowdown, setting the stage for rate cuts at the end of the first half of 2024.

The expected economic slowdown and the impending U.S. presidential election are likely to intensify market volatility. Therefore, we anticipate choppy price action throughout the year. Nonetheless, we are of the view that pull backs present a buying opportunity and expect a continuation of the current bull trend to new record highs in the range of 5,200 and 5,250. Until signs of new economic cycle emerges, we remain cautious, focusing on quality stocks and fixed income.

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Violeta Todorova

Senior Research

Violeta a rejoint Leverage Shares en septembre 2022. Elle est chargée de mener des analyses techniques et des recherches sur les actions et macroéconomiques, fournissant des informations importantes pour aider à façonner les stratégies d’investissement des clients.

Avant de rejoindre LS, Violeta a travaillé dans plusieurs sociétés d’investissement de premier plan en Australie, telles que Tollhurst et Morgans Financial, où elle a passé les 12 dernières années de sa carrière.

Violeta est une technicienne de marché certifiée de l’Australian Technical Analysts Association et est titulaire d’un diplôme d’études supérieures en finance appliquée et investissement de Kaplan Professional (FINSIA), Australie, où elle a été conférencière pendant plusieurs années.

Julian Manoilov

Marketing Lead

Julian a étudié l’économie, la psychologie, la sociologie, la politique européenne et la linguistique. Il possède de l’expérience en matière de développement commercial et de marketing grâce à des entreprises qu’il a lui-même créées.

Pour Julian, Leverage Shares est une entreprise innovante dans le domaine de la finance et de la fintech, et il se réjouit toujours de partager les prochaines grandes avancées avec les investisseurs du Royaume-Uni et d’Europe.

Oktay Kavrak

Head of Communications and Strategy

Oktay a rejoint Leverage Shares fin 2019. Il est responsable de la croissance de l’activité à travers des relations clés et le développement de l’activité commerciale sur les marchés anglophones. 

Il a rejoint LS après UniCredit, où il était responsable des relations avec les entreprises pour les multinationales. Il a également travaillé au sein de sociétés telles qu’IBM Bulgarie et DeGiro / FundShare dans le domaine de la finance d’entreprise et de l’administration de fonds.

Oktay est titulaire d’une licence en finance et comptabilité et d’un certificat d’études supérieures en entrepreneuriat du Babson College. Il est également détenteur de la certification CFA.

Sandeep Rao

Recherche

Sandeep a une longue expérience des marchés financiers. Il a débuté sa carrière en tant qu’ingénieur financier au sein d’un hedge fund basé à Chicago. Pendant huit ans, il a travaillé dans différents domaines et organisations, de la division Prime Services de Barclays Capital à l’équipe de recherche sur les indices du Nasdaq (plus récemment).

Sandeep est titulaire d’un master spécialisé en finance et d’un master en administration des affaires de I’Institut de technologie de Chicago.

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