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Seven short trading days into the new year, stocks are already blazing a trail markedly different than one year ago. Despite some defensive undertones in the early innings of 2024, at least one Wall Street strategist has high hopes for the year after what may be a slightly bumpy first quarter.
Mark Newton, Fundstrat managing director and global head of technical strategy, joined Yahoo Finance Live Wednesday to break down his expectations for 2024.
“I think 2024 started off unlike many years, where the former leaders of the past year are now laggards,” he said. For this year, “it will be easier to make money,” said Newton of the prospects for investors. “My year-end target is about a 10% upside,” he said, referencing the 5,175 level in the S&P 500.
Though 2023 ended a bumper year for returns, early bullish hints were clouded by recession predictions and an uber-hawkish Federal Reserve. A year ago, Santa Claus visited investors over the Christmas and New Year holidays with early promises of a green year-end. But bullish returns eluded most of the stock market until the final two months delivered a much-needed “everything rally.”
2024 is a year of stark contrasts. Healthcare is the leading sector, up 3.3%, with defensive sectors like utilities and consumer staples also topping the leaderboard. Last year at this time, healthcare was in the red, as the Magnificent Seven were gearing up for an unlikely two quarters of domination.
Saint Nick left lumps of coal this season, an early indicator that signals potential hiccups for the rest of the year. And seasonality-wise, election years like 2024 don’t tend to be quite as bullish as the third year of the presidential cycle, but they are bullish nonetheless.
Newton gave a nod to early headwinds this year, saying, “I think the first quarter will be choppy, but people are still very, very negative. We have two wars and inflation. It’s an election year. There’s a lot to be worried about.”
Newton specifically targets February to March for weakness, noting his cycle work, seasonality trends, and distribution of returns across the market.
“Any decline into the end of the [first] quarter could provide opportunity for investors given the bullish intermediate-term breadth, ” he wrote in a note to Fundstrat investors.
Negative sentiment can indeed become a powerful bullish force when it fails to materialize in prices. So “easier to make money” may mean having a strong stomach and doing some good old-fashioned dip-buying.
After a year dominated by tech, Newton still likes the information technology sector this year, along with industrials and energy. The energy sector was by far the best-performing sector during the 2022 bear market, but was one of the few sectors in the red at 2023 year-end.
“I think industrials are one of the top areas for investors to consider,” said Newton, while noting the sector has rallied to two-decade highs.
Inside the sector, he likes Boeing.
“I think there’s a lot of bad news in the name,” he said, adding, “Normally that’s a time when you want to avoid that news and look to buy dips.”
For dip-minded investors, Apple beckons as well, says Newton.
“My thinking is Apple has not shown any technical deterioration, and it’s had a lengthy short-term decline,” he said. “But in the bigger picture, the stock is still in very good shape. I think the bad news has gotten a bit ahead of itself.”
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