Wall Street's cautious stance on the stock market's prospects for 2024 may be overly pessimistic, as suggested by Fundstrat's Tom Lee in a recent analysis. He draws attention to the historical pattern of annual stock market returns, which indicates a trend of significant gains.
Since 1900, the S&P 500 has consistently demonstrated robust performance, with more than half of the years yielding returns of 10% or higher.
In contrast, current forecasts from Wall Street analysts for 2024 seem to underplay this historical trend, predicting minimal or stagnant growth. These projections include Morgan Stanley's flat return estimate and Goldman Sachs' modest 4% increase, both falling short of historical norms.
Fundstrat's survey of over 1,000 investors reflects a more optimistic outlook, with a majority anticipating the S&P 500 to grow between 5% and 10% in 2024. This perspective, however, is not fully mirrored in recent fund flow data, which shows a significant sell-off of U.S. stocks by retail investors – the largest since 2021. This trend, according to Lee, suggests a peak in investor capitulation, often a precursor to a market rebound.
Lee attributes the prevailing market skepticism to a late-cycle economic view, where a looming recession is seen as inevitable. However, he notes emerging signs of growth acceleration, particularly in non-energy sector corporate earnings, which have recently seen their fastest increase in two years.
Lee, maintaining a bullish stance, anticipates a strong finish for 2023. He predicts the S&P 500 could approach record highs, projecting a 7% rise to 4,800 by year-end. His forecast for 2024, set to be released shortly, is expected to align with this optimistic outlook, challenging the prevailing bearish sentiment among Wall Street analysts.
