Plenty of commentators and market watchers predict good times ahead for the stock market from now until the end of the year and through 2024.
There’s been a mixed performance from shares in 2023. But those holding the right ones have probably done well.
Some explosive moves higher have come from stocks that had previously been shunned. Even select big-cap stocks have been doing well, such as housebuilder Barratt Developments, engine maker Rolls Royce Holdings and fashion retailer Next.
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A split market
But it’s been easy to make investing missteps. Some FTSE 100 shares have continued to decline. For example, traditionally defensive businesses such as fast-moving consumer goods outfits Unilever, Diageo and British American Tobacco.
Others have been weak as well, like pharmaceutical giant AstraZeneca, luxury fashion house Burberry and banks such as Lloyds.
The prior bear market had been brutal. Many small-cap and cyclical stocks were sold off without mercy. There’s risk in the stock market. And conditions can change at any time to deliver a poor outcome for investors, even from where it is now.
It’s all been so inconvenient! I’ve been reading what we Fool writers were talking about a couple of years ago. Back then the markets were beginning to settle after the pandemic. It looked like a period of prosperity would meander in and give investors some solid returns in the coming years.
But all that switched on its head when the Ukraine crisis kicked-off. The situation led to a shock for energy and commodity markets. And those problems stoked general price inflation and combined with supply-chain problems. Things have been difficult for many businesses and consumers.
Oversold and undervalued?
No wonder share prices were beaten down. But many have started to bounce back from what now looks like over-sold conditions.
Businesses have been reporting good trading figures in lots of cases. Meanwhile, valuations have been on the floor. And that’s why we’ve been seeing some fast moves higher on news-release days. To me, it all looks very much like the bumpy start of a potentially enduring and broad-based rising market.
According to strategists at BMO Capital markets, US stocks are in a bull phase and will likely deliver more “solid” gains in 2024. Meanwhile, Phil Orlando, the chief equity strategist at Federated Hermes, said much the same thing. And analysts at Bank of America came out as bullish for 2024 too, with CNBC’s Jim Cramer saying he’s optimistic as well.
When inflation looked like it was peaking, many stocks burst into life on both sides of the Atlantic. And several economies avoided recessions that economists thought would be nailed-on certainties.
Meanwhile, some commodity and energy prices have been falling recently. And the cost-of-living crisis has been improving.
In the absence of any more major black-swan-style shocks, such as pandemics and war, a Santa rally through December and into the new year looks likely to me.
Will it continue through 2024? The signs look good. Valuations are still keen for many businesses and underlying trading is robust in many cases.
Something must give. And to my eyes, most of the pressure is upwards. Although positive outcomes are never guaranteed.
