U.S. stocks are getting ready to kick off 2024 with a pause and are likely to stay data-dependent until the start of fourth-quarter earnings season, as a bull run that saw the three major indexes post double-digit growth last year may lose steam in early January, according to strategists at Oppenheimer Asset Management.
The stock market saw a remarkable uptick in the latter months of a wild 2023 amid growing optimism that the Federal Reserve may start cutting interest rates in the first half of this year. The S&P 500 (SPX) soared 11.2% in the fourth quarter, including a 4.4% advance in December alone, for a yearly gain of 24.2%.
“It’s not uncommon for markets to pause to digest a bull run of the magnitude experienced in the fourth quarter just ended,” Stoltzfus and his team wrote in a Tuesday client note. They also foresee the stock market to remain “data-dependent” until more market-moving catalysts arrive later this month, such as earnings reports.
U.S. companies are due to start reporting earnings for the fourth quarter of 2023 at the end of next week. However, Stoltzfus doesn’t see the potential pause in the stock rally as something that would prevent the S&P 500 from achieving his team’s price target of 5,200 by the end of 2024.
The strategists said the “further upside” in stock prices this year will be supported by the “fundamental improvements” in the stock market. They remain overweight on equities, favoring cyclical over defensive sectors, according to the client note.
Oppenheimer also expects U.S. corporate revenues and earnings to continue to grow over the course of 2024.
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