Paul has been teaching in higher education since 2007 and also holds the CFA Society's Investment Management Certificate (IMC). A Terry Smith-influenced quality investor, Paul is a fan of companies boasting seriously high returns on capital. He always reinvests his dividends.
Latest posts by Paul Summers (see all)
These under-the-radar UK shares have thrashed the market. Is there still time to buy? - 18 March, 2024
3 neglected FTSE shares I’d consider buying before April’s ISA deadline - 15 March, 2024
Should I buy more Persimmon shares? - 13 March, 2024
Published
The content of this article was relevant at the time of publishing. Circ*mstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.
Whisper it, but the last few weeks of trading before Christmas suggest that 2024 could be a far better year for UK investors than 2023.
Should this come to pass, I’m wondering which stocks might deliver the best returns.
Why might the market soar?
My main reason for being bullish is that it’s looking increasingly likely (although not guaranteed) that the Bank of England will soon cut interest rates in response to falling inflation.
Now, I don’t think the first cut will be all that much considering the economic landscape is likely to remain fragile for a while. But there’s an argument for saying that it doesn’t need to be. After enduring a thoroughly tricky couple of years, any ‘confirmed’ chink of light will probably do. Never underestimate the impact of a touch of good news if expectations are already on the floor.
If we’re being super-optimistic, there’s always a hope that the Ukraine/Russia conflict might draw to a close next year. If this happens, share prices may receive a further boost. But of the two, I suspect the cut looks more likely.
Which stocks could do well?
A reduction in interest rates should be positive news for stocks in general. But some sectors might experience more of an uplift than others.
I reckon housebuilders could do particularly well. Their share prices have been rising in recent months in anticipation of a revival in market activity. As someone invested in Persimmon, I’ve been lapping this up and hope it will continue.
Consumer discretionary stocks might also benefit as confidence gradually returns. It’s far easier to justify buying something we don’t truly need — holidays, luxury items, cars — if we can borrow money at low(er) rates to pay for it. Could Watches of Switzerland, for example, become a winner in 2024?
Elsewhere, there might be renewed interest in small- and mid-cap tech companies that must borrow cash to expand. Utility stocks could do well too as their dividend streams become more attractive to conservative investors as bond yields fall. Think National Grid.
What could go wrong?
That said, a rate cut may not come as early as hoped. If so, there’s a chance that some of the stocks that have registered great end-of-year gains might struggle to hold on to them.
Again, housebuilders seem likely candidates. Even if a cut does come, I doubt interest rates will ever return to their previous lows. So, affordability will still be an issue going forward.
There’s also an argument that some people and families have found the last few years so tough that they’ve made permanent changes to their (discretionary) spending.
Feet on the ground
Making predictions about what may happen in the markets is fun, especially when one’s feeling as bullish as I am.
But I need to keep my feet on the ground. As writer (and former Fool contributor) Morgan Housel reminds readers in his brilliant new book Same As Ever: “Risk is what you don’t see“. Did you see Covid-19 on the horizon? I know I didn’t.
This is why I’ll continue holding a balanced portfolio rather than betting the farm on a small number of stocks to rocket in 2024. However, I’m certainly not ruling out one or two purchases before 2023 is done.
Wall Street analysts' consensus estimates predict 3.6% earnings growth and 3.5% revenue growth for S&P 500 companies in the first quarter. Analysts project full-year S&P 500 earnings growth of 11.0% in 2024, but analysts are more optimistic about some market sectors than others.
Despite this upward trajectory, many UK stocks continue to trade firmly below 2021 levels. But that may soon change. The improved economic outlook is leading to increasingly bullish analyst forecasts, especially in the second half of 2024.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
During the boom the economy grows, jobs are plentiful and the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose their jobs and investors lose money. Boom-bust cycles last for varying lengths of time; they also vary in severity.
Add together ordinary dividends, special dividends and buybacks and FTSE 100 firms are expected by analysts to return £109.9 billion to shareholders in 2024 and £86.3 billion in 2025. Those figures equate to 5.3% and 4.1% respectively of the FTSE 100's £2.1 trillion market capitalisation.
The FTSE All-Share Index is up just 8.4% over the 12 months to 31 March 2024. This underwhelming showing compares to a 27.1% increase in the S&P 500, 23.5% rise in Japan's TOPIX index, and a 13.8% climb in the FTSE Europe ex UK Index (all in sterling terms).
Additionally, broker forecasts indicate the possibility of further growth in earnings and dividends in 2024. While challenges remain, there is hope that the FTSE 100 can regain its footing and deliver better performance in the future.
2024 may be a good time to look for bargains in international stocks that have the long-term potential to deliver higher returns than US stocks. Fidelity's Asset Allocation Research Team (AART) forecasts that international stocks will outperform US stocks over the next 20 years.
1. Positive returns -- but smaller than in 2023. I think that the overall stock market will deliver positive returns in 2024. However, I expect those returns to be somewhat smaller than they were last year.
The bank's analysts give a positive forecast for the Dow Jones exchange rate in 2024. In their opinion, index quotes will increase by 10% to $40,000 in 2024. If the US economy avoids recession, growth could reach up to 19%. This scenario is more likely due to cooling inflation and stable GDP growth.
As interest rates rise, the interest income from loans typically increases faster than the interest paid on deposits, leading to wider profit margins. Additionally, higher interest rates can boost the earnings of insurance companies and investment firms, as they often hold large portfolios of interest-sensitive assets.
But the booming markets are likely to benefit White families more than families from other racial and ethnic groups. That's because White families are the most likely to own publicly traded stocks, either directly or indirectly – for example, through a retirement account or mutual fund.
An up market does not necessarily have a positive impact on all investors. For example, traders who own stocks can benefit when the stock market is up. However, bond traders may lose money because bonds often fall in value when stocks rise.
Next year, investors can expect declining inflation, reasonable economic growth, and potentially, interest rate cuts by the Federal Reserve, according to Niladri Mukherjee, Chief Investment Officer for TIAA Wealth Management.
While the Indian benchmark Nifty index has been experiencing a rise in the early months of 2024, it doesn't necessarily mean that the market will decline in May. Some investors believe in the adage and may choose to reduce their exposure to the market in May.
Address: Suite 228 919 Deana Ford, Lake Meridithberg, NE 60017-4257
Phone: +2613987384138
Job: Chief Retail Officer
Hobby: Tai chi, Dowsing, Poi, Letterboxing, Watching movies, Video gaming, Singing
Introduction: My name is Zonia Mosciski DO, I am a enchanting, joyous, lovely, successful, hilarious, tender, outstanding person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
