S&P forecasts for 2024 are all over the place … why they’re irrelevant for your portfolio … InvestorPlace’s biggest event of the year next Tuesday … are small-caps the place to be?
It’s that time of year when everyone comes out with their forecasts for next year’s market.
So, how high (or low) are we going?
JPMorgan’s head of technical strategy Jason Hunter says the S&P will crash, hitting 3,500 by summer. That’s a 24% haircut.
On the other end of the spectrum, Deutsche Banks and BMO Capital Markets are calling for the S&P to hit 5,100 by the end of next year. That’s about 12% higher.
There’s a similar lack of consensus when we look at 2024’s economic projections.
On one hand, billionaire hedge fund manager Ray Dalio says a debt crisis is headed our way, and “things are going to get worse for the economy.”
Don’t tell that to Treasury Secretary Janet Yellen. On Tuesday, she took a jab at economists who had predicted that high U.S. unemployment would be needed to tame inflation, saying that they’re “eating their words” and that “we’re not seeing the usual signs of a weakening labor market that would make you fear a recession.”
This wide discrepancy of forecasts can be dangerous. It provides bulls and bears alike abundant data to validate their own preexisting market beliefs.
Investors can use these calls to ignore or downplay contrary evidence and confirm their preferred market narrative. Unfortunately, studies show that this “confirmation bias” is a fantastic way to lose money.
So, how do we play defense against our own biases in 2024? As importantly, how do we position ourselves for next year given these wildly different market and economic forecasts?
We believe a simple approach works best…
Ignore the broad forecasts. Instead, focus on specific pockets of market strength that are most likely to create significant wealth in 2024, independent of what happens at a 30,000-foot level. Then, do all you can to verify that strength through a rigorous, objective analysis of all the available data.
***Focus on the trees, not the forest
It’s easy to reference “the S&P” and talk in generalities about the economy. Unfortunately, these discussions let too many details slip through the cracks.
For example, highlighting the S&P’s phenomenal 19% gain this year doesn’t reflect what’s happened to investors who bet big on electric vehicles in January. For example, the KraneShares Electric Vehicles and Future Mobility ETF (KARS) is down 14%. Meanwhile, the iShares Self-Driving EV and Tech ETF (IDRV) is flat on the year.
Through this lens, big-picture forecasts about the S&P are irrelevant unless you’re an index investor. Instead, what drives your wealth is the unique composition of your portfolio – which might have zero resemblance to “the market.”
Here’s how our CEO, Brian Hunt, puts it:
Around the InvestorPlace offices, we often say, “It’s not so much a stock market as it is a market of stocks.”
We say this because the stock market is made up of many different industries and many different companies. Various economic climates affect industries differently. Something good for one industry isn’t necessarily good for another industry.
For example, the early stage of the coronavirus crisis was great for grocery stores because people rushed to stock up on food … but it was terrible for cruise line operators and airlines …
Instead of thinking of “the market” as a monolithic entity into which you put money, we prefer to focus our attention on individual industries and companies. There’s quite a lot happening behind the curtain we call the Dow Jones Industrials Average.
From this perspective, wise portfolio positioning for 2024 is less about the “macro” – what the broad market and economy will do. It’s far more about the “micro” – what individual stocks and trends will do.
So, what are the stocks and trends that will grow your wealth in 2024?
This question brings us to InvestorPlace’s biggest event of the year next Tuesday night at 7 PM Eastern.
***The annual round table of InvestorPlace analysts and their 2024 positioning
Each December, InvestorPlace’s marquee analysts, Louis Navellier, Eric Fry, and Luke Lango sit down to discuss their top wealth-generating ideas for the upcoming year.
And before we blow past this mention of our analysts, let me provide brief context for newer Digest readers.
Louis is an investing legend. The New York Times called him an “investing icon,” and multi-millionaire Steve Forbes has called out Louis’ “most enviable long-term track record.” He’s an early pioneer of quantitative trading with decades of outperformance under his belt.
Eric recommended more investments that have gone on to return 1,000%+ than anyone else we know of in our industry, earning him the nickname “Mr. 1,000%.” A few years ago, he participated in a stock picking contest for charity and won the entire thing. He beat out more than 650 competitors, including billionaire hedge fund managers like Bill Ackman, David Tepper and David Einhorn.
Finally, Luke is a Caltech-educated investing prodigy, ranked “#1 stock picker” by TipRanks a few years ago. Over the last several years, he’s recommended more than 14 stocks that have soared beyond 1,000%. And here in 2023, his focus on AI and tech stocks have produced scores of triple-digit returns.
Given this collective world-class investment pedigree, we’re all ears when these three experts get together. And this coming Tuesday, Louis, Eric, and Luke will hold their annual round-table discussion of the markets. Much of the focus will be on specific sectors and trends they see creating wealth in 2024.
***For an illustration of the power of focusing on the details then performing rigorous market analysis, let’s look at what a “soft landing” could mean for stocks
The data are increasingly suggesting we could be in for the rare “soft landing” in which the economy cools enough to kill inflation without crashing into a recession.
Such a soft landing will juice the stock market. But which part of the stock market will benefit the most?
Well, prevailing opinion is that small-cap stocks will be the winner. For example, here’s Geoff Dailey, Head of U.S. Equities at BNP Paribas:
After lagging large caps in recent years, US small caps are currently trading at what I see as a wide and attractive discount relative to large cap stocks…
I think we will see small caps begin to catch up… The timing depends somewhat on the ultimate path of the US economy… We think better visibility of a soft landing would bolster a small cap recovery. Large caps would clearly benefit as well, but we think there is more upside to small caps under this scenario.
Luke initially accepted this broad narrative about small-cap outperformance – until he decided to look into it himself. So, he conducted extensive research to answer the question “how do small-caps really perform in a soft-landing environment?”
From Luke’s recent video analysis (which you can watch for free after reserving your seat for Tuesday here):
History says small caps actually underperform during soft landings.
But this is the more interesting wrinkle…
It’s not large-caps that perform the best during soft landings, it’s mid-caps.
When I looked at the data, there were two things that stood out: growth stocks always dominate in soft landings, value stocks always suck during soft landings, and number-two, in the growth arena, small-caps do okay, large-caps do pretty good, and mid-caps do amazing.
The S&P’s 400 mid-cap growth index was always the best-performing index during soft landings: ’84-’86, ’94-’95, ’98-’99, and 2019…
So, what’s the data telling me?
Is Big Tech going to continue to dominate in 2024? Kind of.
Are small-caps going to stage a rebound? A little bit.
But the real answer here is if you want to make the biggest returns possible in 2024, you want to focus your sniper on mid-cap growth stocks.
This is a great example of the type of rigorous, objective analysis we recommended a moment ago.
Now, even with this insight, mid-cap growth is a wide universe from which to choose. But Luke, Louis, and Eric will dive into more details at the event.
***Tuesday’s “Earning Warning Summit 2024” is the biggest evening we put on each year here at InvestorPlace
That’s because it’s ground zero for portfolio positioning as we look ahead to the coming year, bringing together the best ideas from Louis, Eric, and Luke. I encourage you to join us simply to learn how three of our industry’s most accomplished analysts are sizing up 2024’s biggest opportunities and greatest threats.
By the way, they’ll be giving way three free stock recommendations that they believe could soar in 2024 regardless of what happens. They’re yours, just for attending the evening.
One of Luke’s free giveaways at last year’s event was Fluence Energy (FLNC), a leading renewables company. It went on to jump 92% between early January and mid-July.
We’ll bring you more details about the Earning Warning Summit 2024 over the coming days. But to go ahead and reserve your seat just click here.
Circling back to the top of today’s Digest, as we look ahead to 2024, ignore the big-picture forecasts. It’s the details that will make or break your wealth next year.
Have a good evening,