Stock Market Forecast

Who can possibly offer a reliable stock market forecast for 2024 or 2025, or for the next 5 years?

Right now, few feel confident of any projection. With the massive misreporting of jobs (revised down again which means recent reports were completely wrong) and rising unemployment and weakening outlook for the next 6 months, investors are skittish.

With the election uncertainty, there’s no certainty. If the Democrats win, then the economy stays the way it is, with huge geopolitical influences including wars and oil prices loom. If Republicans win the house and senate, they will block the Democrats spending and regulatory strangulation. If the Trump wins, taxes will fall, tariffs will rise, and US business will get a massive lift.

As I suggested in summer, about September, is that a big correction will occur in September. It turned out, as some report, that the Japanese carry trade was the culprit for that reversal.  And now the stage is set for the FED to pull down rates fast. But they won’t do it fast enough. A 25 basis point cut is likely but it’s inadequate. A full 50 basis points now with two more 25 point cuts in November and December are appropriate.

The economy still needs a lift and consumers need a break from high interest rates.

Although corporations are pulling in big profits, small businesses are suffering and will continue to do for the next 8 months. The rotation into small caps was much heralded but is not really happening. Because it’s safer to park funds in the large caps, including Nvidia. There’s safety plus good returns.

So, with that, there’s still no big up catalysts to drive the markets. It makes for a two-month period to buy. The September 16th rate cut will help, but it will disappoint a lot of investors, so expect a drop in the last two weeks of this month.

Stock analysts believe December will bring a Santa Claus rally, similar to last year’s big jump.

The investment climate won’t be cleared until Nov 5th  — judgment day.  If the anti-business party wins, it will result in a big market correction.  We could see a market crash.

We need to look beyond lower rates though to the economic resurgence. A restoring of manufacturing, production and servicing to American companies will certainly give a massive boost. And lower tax rates plus higher tariffs will aid the US economy. A big focus on US companies and jobs in America will make the next 5 years very positive.

Sure we’re in the doldrums now, but the next 5 years should be amazing.  Of course, the story isn’t written yet, as the election in 70 days, will be the number one determinant of America’s future. It could go the other way too.

Lagging effects are really biting in right now.  Employment growth is stagnating and yet inflation persists. GDP is okay, but US manufacturing PMI is sinking. However, as Ed Yardeni pointed out this week on CNBC, US manufacturing numbers are still good. Statistics can lie, especially when they’re meant to deceive.

The timeline of the recovery is still about the same, however we’re seeing a deeper low this September than expected. A 50 basis point drop on the 14th should help to turn things around. A lot of the pessimism is from the feeling that the FED is way too late, and we’re in for a rough landing. And the FED can’t/won’t deflate the rates fast. It’s a matter of pride and principle for them.

Investors are wondering if this is the time to move money out of the money markets to stocks? They waited to buy and now they’re going to be rewarded. There couldn’t be a better fairy tale ending for monied investors who can wait at least a year for a big payoff. And they’ll get it.  This may be the bottom and all of the emotional negative energy is being used up, to ready us for the upside.

Buying at these low prices is a massive opportunity for monied investors. It’s almost like it’s choreographed for the wealthy?

See more on all of the factors affecting US GDP, prices and stock valuations below.

Investors are Nervous

The fear/greed index shows investors are greedy but also very nervous, which is keeping the gauge in the middle. They seem startled by almost every minor financial new bit coming out, each of which is essentially meaningless, temporary and quickly forgotten.

The stock market today is actually just a collection of major corporations, mostly international which aren’t as affected by public money market rates. With the lowering of rates, and perhaps lowering of US business regulations and taxes in the 4 years ahead, some are getting excited about small caps and the yo-yoing Russell 2000 index. You might want to wait to see who wins the Nov 8th election before committing all your money to the rotation to small caps.

As you’ll read below, there are some brilliant minds giving us their view of what will lift the Dow Jones, S&P, NASDAQ and Russell 2000. However, too many of these investment firm analysts revise their forecasts to cover up what they really thought. Shouldn’t they be more poised and consistent about the FED rate outlook, consumer demand, and corporate earnings? Is performance that difficult to assess?

Are their forecast tools simply not working? None correctly guessed at that actual 15% correction in summer – a certain sign that they guess as much as we do, or that the data doesn’t foretell much when politicians are at work.

Volatility: a Signal of a Coming Shock?

An abundance of short-term volatility, and a big economic let down is distracting a lot of investors from their long term investing strategy. Many have to be using a hedging strategy and salting away money for the just-in-case scenario.

They should be focusing on the 5 year term because rates will lower over the next two years. Many are still trying to gamble on big winners and suffering through the whipsaw that analysts like Tom Lee say will continue.

However, Tom is still bullish, looking again to a Santa Claus rally after the Nov 8 elections. He’s still confident, after one three day period which he called gut wrenching on CNBC.  He noted that CEOs want and expect a Trump win. But what if Trump trips himself and loses this election?  What happens when tax cuts disappear, regulations worsen, and the GOP blocks her big spending ambitions? Could the economy crash?  Bankruptcies are at a 23 year high. Businesses do not like Harris, and small businesses may have to suffer continuous high interest rates.

Voters are nervous.

This week’s rebound is making investors feel good as the market is showing resilience.  The worries remain though, as FED’s actions are not guaranteed. A constant downplaying of the economic threats is most concerning.  There might be a few more severe pullbacks, since when rate hikes reverse, a new financial dynamic is initiated (the yield curve is disinverted). The big rate drop signals to investors that the economy looks bad, and they tend to sell when they hear that message.

Positive Signals

Ed Yardeni, in a Fox Business interview today, expressed confidence that the US economy is on track and should recover next year. He says inflation is under control and won’t return. We might have some doubts given supply shortage issues haven’t been resolved. A Trump win on the Nov 8, business will be delighted, thus fueling growth and CPI index gains. July’s Consumer Price Index inflation data will be released on August 14, 2024.

iCapital’s Anastasia Amoroso, on CNBC today, reiterated how uncertain investors are and that that prices have dropped below the 3 month moving average. She highlights the disconnect between the stock market and the economy and how the labor market is slowing. She points out a big drop in the Bloomberg surprise index, lower GDP forecasts, and lofty earnings expectations. She’s talking pullback or consolidation.

And in this CNBC interview, D8’s Barbara Doran feels the market is going to be in ‘no man’s land’ for awhile. However, she thinks the FED will lower rates in September.

Goldman Sachs says China’s oversupply is easing and with tariffs and sanctions, what China does send into the US will be more expensive. Citi Bank believes oil will drop to near $60 a barrel next year, which would give the US economy and US consumer a big financial boost. That will aid inflation.

As the US economy revs up in 2025 (depending on the Nov 8 election), it’s a certainty that inflation will grow as we move through 2025. Housing construction is slowing and as rates fall, buyers will bid up home prices, new or resale homes.

Housing, rent, and gasoline prices are big parts of the CPI index and they will all move higher in 2025. They are stubbornly difficult to lower. In one year, the housing market will be revived, however for this fall, the housing market will suffer.

Right now, Investors are concerned mostly about:

1. price volatility and a stock market correction
2. the impact of persistent inflation
3. geopolitical tensions, wars and supply chain disruptions
4. a recession brewing
5. any Democrat win in the Nov 8 elections

During 2025, market volatility is expected to increase before easing in 2025.  A fear of on paper loses can launch selloffs and discourage investment overall.  Retail and institutional investors still haven’t moved their $6 trillion in money market funds to equities, suggesting there is more damage expected.

Middling Market Forecast: Goldman Sachs recently raised their year end forecast for the S&P 500 to 5,600 points where it is now. That means a flat outlook for the rest of the year.  The reason that’s ridiculous is that the Presidential election will push stock market severely up or down, one way or the other. The economy will falter as fall approaches, and in September we might see some negative event hit which could affect how Americans vote.

So the status quo at 5600 is likely the last level it will see in December, after the election. My prediction is President Trump will win and the Republicans will take the house and Senate.  The S&P will surpass 6000 in January and that Wall street will really enjoy the outcome of lower energy, reduced regulations, reduced taxes, and a truly pro-US trade policy in 2025.

Once the real joy of an emancipated pro-US economy kicks in, let’s not rule out at 6500 spot for the S&P.

Goldman refers to AI advancements and positive mega-cap earnings, as though nothing else exists in the economy. This has made investing dangerously narrow and at some point a broadening has to happen. That will make the Russell 2000 stocks the best place to be. Investors seem to be sensing that of late.

This minor confidence in the Russell 2000, is just a hint at what will happen with a full-blown market transition to small-cap stocks. Studying the Russell stocks is what most investors should be doing as they sit on their current portfolio. Many are moving money from the NASDAQ over to small caps. However, that move might be too early. This fall may not be pretty if the FED doesn’t cut rates enough. A 25 or 50 basis cut may be disappointing.

Will a Broadening Out of the Market Occur this Year or Next?

Can a marketing broadening to small caps possibly occur if rates don’t go down? Here’s what Marketwatch is saying about a broadening. Money has been leaving tech stocks of late, and at some point, we’ll see an exodus from safe haven mega caps. For now though, investors are keeping their money in them.

If you’ve chased the AI trend, from Q4 of 2023, you might have done well. However, we’ve seen that when the macroeconomy suffers with gloom and doom, AI companies don’t look as promising. They dove after April, when the economic outlook soured. We wonder what is going to happen after the Presidential election. Because a Trump win would likely mean lower taxes and reduced regulation for US companies and perhaps lower interest rates. That promise has to mean investors are salivating at the opportunity to invest in US stocks. Is it still to early?

And which investment strategy are you partial too?  Is it a all large cap tech focus, or diversification strategy (see what the Motley Fool says about how to diversify) or is a defensive strategy the best? See what Morningstar feels the most underrated stocks are right now. I’d like to hear your thoughts on that on Linkedin.

A best prediction about investment timing is that after the next market correction is the ideal time to buy. Many investors might already know that and are quietly reviewing the best stocks to jump on.

Most economists and stock market analysts believed interest rates would have declined by now, but it hasn’t happened. A few see rates staying high till 2026, which is hardly encouraging for stock price growth. A 5% return in money markets might look safer and more productive.  If you don’t invest, you won’t be getting on top of what could be a grand opportunity ahead.

May and June were tremendous months for some stocks after the April correction. The recent rise in Russell 2000 stocks is noteworthy. Some investors see them as investible ahead of a market surge for 2025. They’re market optimists.

Two factors might be most influential in signaling the path forward for the H2 2024 stock market.

1. an expectation the FED will keep the central lending rate where it is at 5.33%. Sure the optimists keep holding out for two cuts this year, but inflation has been sticky and two small cuts may not provide much lift at all. It’s much ado about nothing.
2. The other is stagnant US GDP. Last quarter’s GDP growth came in at a measly 1.6% vs 2.1% for the same quarter in 2023. The economy is weaker now with the same high interest rates, and stagflation isn’t an outlandish view.

Consumer Spending Will Weaken

There are no massive catalysts in sight so a correction isn’t out of the question. Certainly, in the fall, without rate cuts, it might happen. Consumers are cutting back.  Americans are hurting, and the wealthy are cutting spending too. The situation in California in particular is alarming. And the south is seeing its economy slowing.

Will the monied US consumer continue to spend through 2024? Census.gov reports that US GDP rose 0.1% May vs April and is up 2.3% year over year. April’s numbers were however, revised downward to a .2% loss.

Deloitte reports that US household income and spending fell slightly from May to April. In April, real (inflation-adjusted) disposable personal income fell 0.1% vs March due to a sharp slowdown in employment growth from March to April. So if we’re looking at fundamentals and a 3% inflation rate which keeps the FED from cutting, why is there so much glee in some forecasts?

Will the Stimulus Funds Keep Flowing?

Americans may not realize or not want to think about is how inflation and GDP is currently supported by government stimulus funds including the Dems infrastructure improvement budget.

While hedge fund managers celebrate the layoffs, promised AI efficiencies, and outsourcing to India, inflation is sticky inviting prolonged headwinds for real estate markets, small business growth, and tax revenues for the government.

The housing market has stagnated while home prices continue to rise in most cities due to shortages. Millions of mortgages are coming due at 6+ rates, which is unaffordable for many. The longer the rates stay high, the more damage will come out of the housing market.  When the housing market lags, it’s spinoff economic activity furthers deflates and manufacturing and retail sales slide.

Summer 2024 is Here. What’s Changed?

Summer brings families to spend on travel, food, home entertainment, and more giving the economy a lift. it’s raised food and gasoline prices,

Hot Stocks!

Gigacloud continues to shine despite its decline lately, while health stocks have surged. Redwire at $7.00 a share might be worth a look. 4 analysts give it a strong buy rating.

The economic and trade break with China is certain and this bodes well for the US economy.

Stock Market Predictions for 2024

What is a stock market predictions worth today? Let’s look back at Wall Street’s forecast for the S&P in 2024 (we’re at 5600 now).

And here are the forecasts from late 2023.  What is your impression of the major banks’ predictive capabilities?

Goldman Sachs Research forecasted the S&P 500 index would end 2024 at 4700, for a 12-month price gain of 5% and a total return of 6% including dividends. We’re far beyond that, which means these companies have a far too fearful outlook that investors are beginning to disrespect.

As you can see, most investment companies are bullish about 2024 with a range of about 8% to 10% for the optimistic, most noted authorities.  Of course, we’re well up already two months into the new year and it looks like these will be revised upward as increasing good economic news is reported.

The US economy is in excellent condition. Unemployment is 3.7%, inflation is only 2.8%, income is up 3.4%, consumer spending continues moderately, and US national income is up and forecast to rise continuously to 2029.

Let’s Review why the Stock Market Forecast is so Rosy

• inflation continues to lower
• FED rate cut expected in June/July and a full 1% lower by 2025
• US GDP slowing thus inflation may be past
• US dollar weakens strengthening exports
• $6 to 8 Trillion in money markets could move to equities as interest rates fall
• materials prices on a downward trend (natural gas, oil, lumber)
• innovation and investment in AI contributing to a rebuilding of the economy and a renewing of many products in use (laptops, smartphones, autos)
• investor doubt and insecurity have eased of late given the rally is so persistent, weathering all bad news
• normally sluggish 1st quarter downturn will end in a few months
• China dependence is decreasing with the re-onshoring of manufacturing to the US
• trillions in US infrastructure spending due to start this year
• unemployment is rising slightly which helps keep wage demands down
• Earnings are slated to increase by an unthreatening 1.3% YoY with topline sales expected to grow by 3.1%
• Presidential election 8 months away with the tax-cutting, deregulating Donald Trump in the lead
• A defeat of Joe Biden translates to pro-business policies which gives investors tremendous relief
• Goldman Sachs sees the S&P hitting 5100 this year
• Chips Act and infrastructure spending should bolster economic growth

After a strong 3 months, the Dow Jones, S&P, Russell 2000 and NASDAQ are gaining speed.

At this point, you’re wondering which sectors are going to boom this spring, and which individual stocks will rocket. Certainly, the Russell 2000 has some hot stocks rocketing right now. The overall trend for the Russell is heading upward yet there are still concerns about the economy.

Hottest Sectors this Week

Perhaps not surprisingly, technology, consumer staples, and communications lead the way. Materials and energy leveled upward but are not expected to do well for the next few months. The Dow was lagging because of poor economic news.

Have a look at the 3-month and 6-month projections for the stock market and collectively you’ll see the bull market horizon is not far off. And view the 5-year forecast for better clarity for the road ahead. Getting a grip on the macro picture is important, and don’t forget that politics is the dictator of markets and they can still throw a monkey wrench into this (high rates, regulations, anti-stimulus spending bills).

Will Fear of Missing Out Also Boost the Stock Markets?

FOMO investors are afraid of losing out and if they start moving all that money from the money markets ($4 to $6 Trillion estimated) then stock prices could rocket. It’s definitely time to own something. You may find the best stocks to buy today, or next week are a basket of large caps, but for those who demand more, the Russell 2000 small caps are likely where you’ll get rich.

“This environment where rates are cooling, inflation is moderating and the Fed is on the sidelines, that is typically a good backdrop for risk assets. Typically when rates start to move lower, you get valuation expansion and the areas that we could see some more meaningful valuation expansion is outside of large-cap tech.” — Mona Mahajan, senior investment strategist at Edward Jones

Interesting stock picks:

Arm Holdings (ARM), United Rentals (URI), Toll Brothers (TOL), D.R. Horton (DHI), TopBuild (BLD), InterContinental Hotels (IHG), Marriott Worldwide (MAR) and Palantir Technologies (PLTR).

AI technology, homebuilders and travel companies are the best stocks to buy. I like DR Horton and Toll Brothers outlook for the next few years. The demand for housing is intense with resale properties unable to be sold with severe shortages (costs, interest rates, materials shortages, lack of government support). As mortgage rates fall, hungry, impatient buyers will jump on new homes available on the market.

Certainly, the 7 million new illegal immigrants will need everything from housing and furniture to cars and clothing.

The November 2024 election is only 11 months away.  It’s hard to ignore this growing factor for the stock market outlook.  If President Trump is re-elected, taxes and spending would drop and the FED rates forced downward. Business likes that kind of thing.

When Will all that Money Market Money move over to Equities?

Markets have suffered low volume and disinterest for sometime, yet $5 to 6 Trillion in money markets is one reason to hang in there with your best picks.  Not all of that money will move, but a good chunk of it will by end of 2024.  If Biden wins, then money will retreat to the money markets.

Year to date, NASDAQ and the S&P 500 have persevered well. As interest rates ease, the NASDAQ was positioned best for growth, which means US tech stocks might be the best bargains. Here are your top-performing tech stocks of late on the NASDAQ exchange. With the coming growth of AI, Nvidia has caught the eye of investors.

Morgan Stanley pointed out in their Stock Market Outlook 2023 report, the stock market does very well in non-election years (+71%), and not badly in Presidential election years (40)%).

6 Month Stock Outlook

By April of 2024, we might be through most of the bad news and economic crisis. The economist’s dour predictions of a 2024 crash/downturn will be done. By then, the Dems will have to capitulate on spending to reduce inflation, and that will drive a massive upward shift in the DOW, S&P, NASDAQ and Russell 2000. See more on the 6 month S&P forecast.

If the FED rate drops and mortgage rates fall, it could stimulate the housing market which fires up everything. There is a crisis in the multifamily sector for overleveraged builders, but those that get through it will see their sales improve by next spring of 2024.

The 5 Year Stock Outlook

For the period 2024 to 2029, we’re looking at impressive growth. This is mostly fueled by lowering interest rates, expanded oil and gas production, bringing manufacturing back to the US, and government spending more in line with reality instead of ideology.  The US leadership in AI and microchip manufacturing is key since AI will increasingly influence manufacturing, services and the financial sector. Perhaps even the AI stock market software tools will be useful then. See more on the 5 year market outlook and even check out the 10 year forecast.

Key Market Signals to Watch

Government Debt Crisis and Shutdown:  key driver of this current downdraft in stock prices. There will be damage as government credit rating and suppliers are affected after the shutdown. Lower spending means companies will review their risks and their decision to work with the US government going forward.

Lower Bond and Treasury Yields:  Right now the FED is sticking it to the equities market due to their desperate search for cash to pay out on debt liabilities. That’s drawn money into the bond market for comparatively weak ROI for investors who want a lot more than a few percent growth.  Only equities pay off big and create millionaires. Charles Schwab expects yields to fall in Q3 and into 2024 as inflation continues to cool.

Stock Markets Heading Down:  The last 3 months have been strong, but overall support for a strong Q4 is weakening, and Q1 2024 is looking cloudier with rain in the forecast. Yet, after March, investors may the sun shine through.

Regional banks stocks: they’ve seen their stock prices fall strongly last week. The FED noted in its Loan Officer Survey that “Banks reported tighter standards and weaker demand for all commercial real estate loan categories.” Higher for longer interest rates combined with tighter lending standards threaten to slow the economy which relies on credit (real estate).

New Inflation Data: New inflation data released from the Bureau of Labor Statistics showed the (CPI) a 0.3% increase in December to 3.4%, following a 0.1% rise in November. Energy, producer prices and import inflation are consistently negative.

FED Pivot Timing:  There is no consensus about the FED easing cycle for 2024. Some believe a .25% cut is due in March leading to a full 1% decline over 2024.

Rising Oil and Natural Gas Prices: OPEC looks weak as the US pumps a record 13 million barrels of oil per day, and a very warm winter has led to plummeting natural gas prices. Although middle east wars are causing oil supply fluctuations, it is likely supplies will flow even better in the year ahead, to help keep energy prices down at least for 2024.

Strengthening US Dollar: the US dollar had weakened great but is now on the rise once more (103 dollar index) and that will help foreign investors buy more in the US or invest in fast growing US companies.  US exports should enjoy a short period of international trading advantage.

$6 to $8 Trillion Cash in Waiting When the Market Gives the Green Light

Investors still hoard a lot of cash, at record levels, and are still waiting for the stock market to really turnaround. During the past year, US investors holding cash were hit badly and few FX experts are calling for a resurgence in the greenback.  A strong persistent bull run should draw them back setting up a strong upswing in all indexes.

Money market funds are still swelled at $5.3 Trillion with inflows infusing another $599 Billion into the sector, according to a Bank of American report. However, the last time we saw huge inflows like that was back in 2008 after the Lehman Brothers collapse.

Dow Jones DJI Projections

Currently, for year to date, the Dow Jones is underperforming and Dow Jones stocks are barely up for the year. The economic slowdown, with the rapid rise in credit costs, has stunted manufacturing.

This chart from Barchart (one of the best investing websites to subscribe to) shows few Dow Stocks were thriving despite today’s great rise. However, there will still be a great buy the dip opportunity. Investors should review oil stocks since the price of oil is suppressed. Commodities and energy industry experts believe oil prices will rise — either through OPEC cuts or the depletion of the Special Petroleum Reserve.

What Do the Economists Say about a Recession?

Ethan Harris, head of global economics research at Bank of America Corp. “We’re either going to have a weak economy or a recession.” — TBS News Report

Jamie Dimon of JP Morgan said there’s a 66% likelihood the U.S. is headed into a mild recession or something even worse.

“We put the odds that the economy will suffer a downturn beginning in the next 12 months at one in three with uncomfortable near-even odds of a recession in the next 24 months,” said Moody’s Analytics chief economist Mark Zandi said last May. — Washington Post.

Are Investors Not Realizing the Bear Market Has Left?

Lael Brainard, usually a more dovish policymaker, said she expected “a combination of rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a more neutral position later this year. Further tightening would follow as needed” — from CNBC report.  So far, pretty accurate.

Forecasts 3 Months to 5 Years to 10 Years

Getting a clear view of the economy in the next 3 months to 10 year framework takes a little study. You can view more on the immediate market situation, the 3 month outlook, 6 month outlook, 5 year outlook and 10 year outlook. A smart investor will make themselves very aware of each forecast period.  The current market view will disappear and like a slide show, move to the next period.

The five year to ten year outlook is steadier and it’s important to consider that politically, the intent is to bring industrial production back to the US. That single factor should help view the future more optimistically. Interest rates, mortgage rates and lending to small businesses should all improve.

Stock Market Crash Possibilities

There are very few credible market economists who are expecting a crash, although a few believe a downturn in the summer will occur as inflation creeps back up, and the FED responds with a hike. The FED may not hold rates where they are if inflation does pick up by June. It’s sufficient to keep the FED out of the markets and let laisses faire take hold, to the degree it’s currently allowed.

Here’s 7 Factors to Watch as Signals of a Downturn

• inflation persists or rises (wages, energy, consumer prices, rent)
• government insists on printing more money and spending more
• Interest rates rise (could go up further)
• disappointing earnings in Q4 (consumers pulling back spending fast)
• geopolitical conflict such as China/Russia strife (that will intensify)
• regional bank crashes (believed to be done, but some concerns remain)
• oil price shocks (yes, oil prices are rising fast with supply down and oil sanctions enforced)

What’s the Long-Term Investment Outlook?

The 10 year stock market outlook is less certain of course, but consider that Millennials and Gen Z’s will slowly form more families and this is a massive number of people and a high spending phase of their lives. Additionally, millions of illegal immigrants flooding into the country in their 20’s to 40’s represent additional market demand. Demand drives prices and economic growth which fuels growth for many of the stocks above.

As interest rates and mortgage rates fall, the business community can enjoy a return to profitability while banks resume normal lending for credit, business and buying homes. The 2024 outlook for the stock market is wonderful!

Check out this list of Stock Trading Websites where you can launch your stock-buying campaigns.