3 Month Stock Market Outlook

The Dow, S&P, NASDAQ and Russell 2000 are all at historically high levels, something many experts felt wouldn’t happen. But now the FED has spoken about a pivot and the year-end rally showed investors have confidence about the next 5 years

The next 3 months should be a little slower, yet the rally continues to be a good time to buy the best stocks.

As Tom Lee of Fundstradt Advisors said, analysts got it wrong about the rally. He consistently stuck to his late-year rally forecast of 4750 for the S&P, and now it’s reached 5137 here in March. When the market beats the only expert who forecasted it would reach this high, it tells us the rally is very strong. The markets so far have beaten all of forecasts collected just 3 months ago. Either the experts don’t know their predictions or they’re excessively cautious (no confidence).

In a Forbes report, they found that since 1950, when the S&P 500 is higher in both January and February of that year, it has continued higher over the next 12 months 27 out of 28 times and generated an average return of 14.8% during those 12 months. That’s a big fact to validate this coming 3-month expected growth for the S&P 500.

With the 8.31% rise in 2024 ytd, don’t be surprised if we see another 3% by May.

S&P 500 Year to date.
S&P 500 Year to date. Screenshot courtesy of Google Finance.

The 2024 stock market should be stronger than expected even with no Fed rate changes. Just the fact rates won’t go up is sufficient for investors to go bargain-hunting now. As covered in the 2024 forecast, a number of major economic drivers give the green signal including infrastructure spending, pro-American trade policies, declining interest rates, strong corporate performance, declining China, strong employment earnings, low unemployment, AI productivity enhancements, flattening inflation, $6 to $8 trillion in money markets ready to move over to equities, along with the possible election of a new pro-American president could be elected in 9 months.

Take a look at some good stocks to buy and keep an eye on the AI stocks including Nvidia and AMD.

The Next: March, April and May

The next 3 months might be a little bit of a plateau as no major news stories are expected. The Fed will not lower the interest rate by July and we might see consumer spending slow a little. This should keep inflation under 3% which is not bad. The FED wouldn’t have to overreact to it which is unlikely.

inflation continues to fall. 2.8 year over year in February.
Inflation continues to fall. 2.8 year over year in February.

On Feb 20th, the Conference Board officially called off its recession call.

It might be true that the equities markets have been driven by the irrational exuberance of AI opportunities. It’s pushed Nvidia, AMD, Super Microcomputer, Broadcom, Intel and other stocks up crazily. It’s because so much money has been invested in AI with more to come this year.

Opportunity follows money, so it shouldn’t be a surprise to you that the AI stocks are the place to be. Artificial intelligence will support massive gains in new services and devices which makes all previous products obsolete.  Data centers are the focus, but AI is supercharging everything. Expect the NASDAQ to do very well this year, and will pick up in H2 as the Fed begins easing rates.

Easing rate expectations may stimulate the housing market after we see home prices fall a little in the next 3 months. By summer some demand will return pushing up builder stocks such as Toll Brothers and DR Horton. However, right now, the AI trade is likely going to provide better returns. The housing market’s revival is still a ways off. Buyers right now are struggling with the down payment, and new condos are taking longer to sell.

Have a closer look at some of the projections for the next 3 months, 6 months and 5 years and overall it’s an optimistic picture. See the 6 month economic projections to gauge macro concerns.




 

Which stocks to Buy in March?

You might want to visit Barchart.com or Google Finance to check those stocks that have performed well in February because no big events in March, they might lead the way again. Something negative will have to happen to change the upward trend.

Yahoo Finance Top Stocks to Buy

Yahoo Finance too, believes these stocks are good opportunities for March (stats courtesy of Google Finance):

    1. Berkshire Hathaway Inc (NYSE:BRK) +4.17% in last month, p/e ratio of 9.24
    2. UnitedHealth Group Incorporated (NYSE:UNH) -2.67% in last month, p/e ratio of 20.5
    3. JPMorgan Chase & Co. (NYSE:JPM) +4.87 in last month, p/e ratio of 11.2
    4. Oracle Corporation (NYSE:ORCL) -2.24% in last month, p/e ratio of 41.6
    5. Merck & Co., Inc. (NYSE:MRK) +.62% in last month, p/e ratio of 885.91
    6. Bank of America Corporation (NYSE:BAC) +4.12% in last month, p/e ratio of 11.6
    7. General Electric Company (NYSE:GE) +15.21% in last month, p/e ratio of 19.88
    8. Broadcom Inc. (NASDAQ:AVGO) +12.55% in last month, p/e ratio of 42.4
    9. Danaher Corporation (NYSE:DHR) +4.09% in last month, p/e ratio of 45.2
    10. Union Pacific Corporation (NYSE:UNP) +2.57% in last month, p/e ratio of 24.2
    11. Intel Corporation (NASDAQ:INTC) +2.45 in last month, p/e ratio of 47.2
    12. Exxon Mobil Corporation (NYSE:XOM) +4.22% in last month, p/e ratio of 11.9
    13. Walmart Inc. (NYSE:WMT) +4.52% in last month, p/e ratio of 30.7
    14. Elevance Health, Inc. (NYSE:ELV) +1.79% in last  month, p/e ratio n/a
    15. Johnson & Johnson (NYSE:JNJ) +4.06% in last month, p/e ratio of 31.5
    16. Pfizer Inc. (NYSE:PFE) +.075 in last month, p/e ratio of 41.6

What to Look for in the economy for the Next 3 Month Period?

  • the Fed won’t likely cut rates until after the next 3 months in late June if at all
  • lagging effects of rate hikes continue to soften the economy and business spending
  • unemployment will rise slightly as multinationals layoff more workers
  • corporate earnings reports will likely fade as consumer spending falls
  • oil prices rising given global tensions
  • US dollar will likely stay steady but fall by summer as the FED begins easing rates
  • It’s risk on for investors who are confident that inflation has been beaten
  • FOMO will draw money into the market
  • large investment funds will bring money market funds in and buy AI stocks and Bitcoin)
  • AI, Pharma, industrials, and consumer discretionary stocks will grow strongly in spring

The next 3 months should offer plenty of opportunity for investors to jump on board the rally that should continue throughout the year, even despite lower corporate earnings. The key here is that as interest rates fall, money will flee the money markets.

Looking ahead to 2025 when President Trump resumes another term in office as President, we can see much better circumstances for US companies with lower taxes, fewer regulations, and still enjoy the infrastructure spending that has been set for 2024/2025, and the implementation of AI technology into business. The forecast for the next 5 years looks very good and this should draw money continuously into the stock market.  Inflation may not go down, thus keeping money in checking accounts and money markets is not a good investment.

Take more time to learn all you can about macroeconomic forces, sectors and the stock market forecast.

See more on the 6 month economic outlook, 6 month stocks outlook and the forecast for next week.

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