Wall Street just finished a strong year, and investors are wondering what the next step is to have a successful 2024. The S&P 500 rose 24% in 2023, ending the year just shy of its all-time high. The Nasdaq Composite Index rose 43%, its best performance since 2020. The Dow Jones Industrial Average rose 13.7% after hitting an all-time high this year. Strategists at major Wall Street firms are divided on where the market will go in 2024. The market's highest price target for the S&P 500 predicts an 8.7% rise from Thursday's close. The minimum target would imply a 12% decline, according to a CNBC Pro market strategist survey. There are also concerns that a recession may occur. A December survey by the National Association for Business Economics found that 76% of economists think there is less than a 50% chance of a recession next year. .SPX Mountain 2022-12-30 2023 SPX Raymond James Chief Investment Officer Larry Adam also said that the base case for 2024 is a “moderate recession.” However, former Dallas Fed President Robert Kaplan told CNBC on Dec. 26 that there is a “good chance” the U.S. will avoid a recession altogether in 2024, while the of America recently said the Fed could succeed in a soft landing. With this in mind, CNBC Pro asked three strategists and money managers how they would allocate $50,000 heading into the new year. Here's what they said: Stephen Wieting, who buys semiconductor and medical equipment makers, believes countless opportunities await investors next year as the bull market seen in 2023 widens. In other words, investors who feel they missed the boat in October need not worry. “We expect equity markets to benefit next year,” Citi Global Wealth's chief investment strategist told CNBC. ” he said. “We're going to see a lot more companies posting double-digit profits next year,” Wieting said, while earnings per share for the Magnificent Seven, which includes Nvidia, Metaplatform and Microsoft, soared 44% last year. The average earnings per share of the remaining 493 companies in the S&P 500 fell by 6%. However, many companies are showing bullish signs of a more positive macroeconomic backdrop, and Wieting expects their profits to improve in the new year. With large-cap stocks currently trading at high prices, Wieting broadly recommends small- and medium-sized U.S. growth stocks with growing earnings. Within the technology sector, the strategist highlighted smaller semiconductor equipment makers as a “strong catch-up trade.” Wieting stressed that while the government has given strong incentives to build new chip manufacturing facilities, stock prices for equipment manufacturers have not risen as much as for chip designers. A fund that invests in small- and mid-cap semiconductor stocks is the SPDR S&P Semiconductor ETF (XSD). The fund grew 35% last year and has an expense ratio of 0.35%. The strategist also believes that the fortunes of equipment makers in the healthcare industry could reverse in 2024. “This is another area that continues to perform incredibly closely, but it's led by several pharmaceutical companies that treat diabetes and help people lose weight, and there's literally a duopoly in that area. ” he said. Exposure to this space can be gained through the SPDR S&P Health Care Equipment ETF (XHE). The fund fell 6% in 2023, with an expense ratio of 0.35%. Investing according to personal characteristics Mike Bailey, director of research at FBB Capital Partners, offers different approaches to different classes of investors depending on their net worth, time horizon and risk tolerance. For a stay-at-home investor with a low risk appetite (perhaps nearing retirement age), Mr. Bailey believes it would be most beneficial to invest his $50,000 in a basket of corporate bonds. Specifically, Mr. Bailey recommended either the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) or the iShares Core US Aggregate Bond ETF (AGG). This he two funds rose 5% and he 2.3% respectively in 2023. People with longer time horizons, who can take on more risk, and who own little or no assets should buy funds that track the S&P 500. Bailey said. Bailey recommends this strategy for the long term, regardless of potential short-term macroeconomic headwinds or current stock market price increases. Mr. Bailey, who has a background in behavioral finance research, believes that keeping research simple is a wise choice for this type of investor. By owning 100% of large-cap U.S. stocks, buyers can earn higher returns than bonds while avoiding common behavioral finance fallacies such as buyer's remorse and concentration illusions. You are also less likely to fall into the trap of fad investing. He also offered recommendations for mid-tier investors who have some capital invested but have a higher risk tolerance and longer time horizon. For these investors, Mr. Bailey likes Berkshire Hathaway, calling it a cash-rich countercyclical. Berkshire stock is up nearly 16% in 2023. He also recommended UnitedHealth, which has proven its ability to perform in both bull and bear markets, and Visa, a high-tech company with high margins and good recurring growth. While health insurance company stocks fell slightly last year, digital payments stocks rose 25%. Bailey also likes Eli Lilly, the pharmaceutical company that developed the GLP-1 drug Mounjaro. “There's a lot of expectations built in for growth, but it's also early days, so I think the stock could continue to perform,” he said. Eli Lilly rose 59% in 2023, making a breakthrough. REITs heading for recovery in 2024 His Cresset Capital Management chief investment officer Jack Ablin agreed with Bailey, saying investors with no up-front investment and at least a seven-year horizon should consider the S&P He says he owns a broad basket of 500 stocks. It's a great place to start. “What we found is that if you hold a broad basket of stocks for more than seven years, you have almost a 90% chance of making a profit,” he said. In this situation, investors do not need to worry about sector-specific allocations. For investors with an existing portfolio looking to outperform the market over the next year or two, Ablin recommends buying a real estate investment trust for $50,000. “REITs are trading at a pretty deep discount,” he said, adding that REITs will be hurt by rising interest rates in 2022 and essentially trade flat in 2023. “REITs have some opportunity to bounce back, especially in an environment where short-term expectations are high.”Interest rates will gradually come down. '' Mr. Ablin's recommended stocks for the new year include Essex Property Trust (ESS), which specializes in multifamily rentals and has a long history of increasing dividends over time, he said. Federal Realty Trust (FRT), which invests in neighborhood shopping centers, has a similarly strong history of dividend growth, he said. The two REITs added 17% and 2%, respectively, in 2023. Finally, Mr. Ablin highlighted T. Rowe Price Group as a money manager that is expected to prosper as the market expands in 2024. The money manager's stock price has fallen 1% in the last year.
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