Predictions are hard especially about the future but if you are in our lively show business, what can you do as one of the top strategists? In another report that crossed my desk, Morgan Stanley’s Mike Wilson sees stocks nearly flat in 2024. Not exactly what the bulls are looking for, I know. If you ask me, nothing goes up in a straight line.
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Wilson projects earnings growth in the S&P 500 to USD229 per share, resulting in a year-end target for the benchmark index of 4,500. That target represents nearly 2% upside to current levels, well below the average yearly return of about 10%for the S&P 500.
Wilson’s projection stems, in part, from lackluster commentary from companies about the health of the US economy and consumer headed into 2024. “While the medium-term outlook for earnings looks positive, the near-term backdrop remains challenged,” Wilson wrote.
“Earnings revisions breadth, which typically leads consensus estimates, has rolled over once again and is at the lowest level since March this year. Underpinning this trend is more cautious corporate commentary overall that’s once again centered on the macro.”
Wilson also highlights how the erosion of fiscal stimulus to fuel consumer spending and the impact of the Federal Reserve’s “higher for longer” interest rate strategy is “increasingly weighing on both corporate and consumer sentiment.”
“The combination of these factors suggests that earnings headwinds will likely persist into early next year before a durable recovery takes hold,” Wilson wrote. Importantly though, Wilson, who has been bearish on the market and earnings since before the 2022 drawdown, sees earnings improvements ahead in 2024.