Strong 2023 sets positive tone for US stocks in 2024

The robust gains in the US stock market in 2023 may set the stage for continued growth in 2024, according to historical trends. With the S&P 500 closing the year with a gain of just over 24 per cent and nearing its first record closing high in about two years, market strategists are optimistic about the potential carryover effect. 

Historical data from LPL Research since 1950 indicates that years following a gain of 20 per cent or more have seen the S&P 500 rise an average of 10 per cent, with positive outcomes 80 per cent of the time. Momentum, durable trends, and solid fundamentals contribute to this positive outlook.

Analysts at LPL Research have set a 2024 year-end target range for the S&P 500 between 4,850 to 4,950, with potential upside above 5,000 under favorable conditions such as lower interest rates, double-digit earnings growth, and economic resilience.

The index closed at 4,769.83 recently. Other indicators, including rebounds from steep drawdowns and reaching record highs, further support the bullish sentiment. However, potential challenges, such as economic wobbling or accelerating inflation, could impact market momentum.

Investors are closely watching fourth-quarter corporate results, anticipating a stronger year for profit growth in 2024. 

The Federal Reserve's monetary policy meeting in late January will provide insights into policymakers' stance, especially after signaling a dovish pivot in December with projections of 75 basis points of rate cuts for 2024. 

While historical indicators point to a positive year, analysts stressed upon the importance of considering current economic conditions and uncertainties.

(With Reuters Inputs)