Despite the Federal Reserve’s strong monetary tightening policy, a banking crisis, and escalating geopolitical tensions, the US avoided a recession in 2023. What is the US market outlook in 2024? Investment experts express their views. 

US Outlook for Macroeconomics

Michael Reid, US Economist at RBC Capital Markets, expresses confidence that a recession in the US is not on the horizon for 2024. However, he does highlight potential challenges, noting downside risks for GDP and acknowledging the presence of upside risks for inflation. 

“The U.S economy hopes for a soft landing in 2024, but consumer crosswinds, election outcomes, quantitative tightening, and geopolitical shocks could complicate the outlook,” says RBC Capital Markets.  

JPMorgan also anticipates that the real GDP growth of the United States will tread the line between modest expansion and contraction for most of the upcoming year.  

“After tracking to a better-than-expected 2.8% real GDP growth in 2023, we forecast a below-trend 0.7% pace of expansion in 2024. Among the major components of GDP, consumer spending is likely to rise at a more muted pace next year, while fiscal spending could swing from a positive contributor in 2023 to a modest drag,” writes Ginger Chambless, Head of Research, Commercial Banking at JP Morgan. 

Daniel Morris, Chief Market Strategist at BNP Paribas Asset Management, anticipates that the funds fueling the US economy in 2023 may deplete in 2024. He points out diminishing excess consumer savings and underscores the impact of elevated interest rates on demand, affecting both goods and services, with a specific focus on the housing sector. 

“We nonetheless do not believe the slowdown will end in recession. We expect US quarterly GDP growth to weaken at the beginning of 2024, but only briefly…We expect core inflation to moderate further…,” he adds.  

Lazard Asset Management holds the view that the US is commencing 2024 from a favourable position, maintaining optimism that inflation in the country will experience a relative deceleration. 

“2024 might represent an economic inflection point if the Biden administration’s industrial policy can create competitive, export-based industries. Landmark pieces of US legislation…are expected to add to productivity growth over a multi-year period as government incentives stimulate increased private sector investment,” says Lazard. 

US Equities Outlook

The US outlook for equities remains bright, according to investment experts, after the country’s stock market saw positive trends in 2023. 

“We forecast the S&P 500 index will end 2024 at 4700, representing a 12-month price gain of 5% and a total return of 6%, including dividends. Our baseline assumption during the next year is…earnings rise by 5%, and the valuation of the equity market equals 18x, close to the current P/E level,” says Goldman Sachs.  

Chris Hyzy, Chief Investment Officer at Merrill and Bank of America Private Bank, suggests that the US equity markets, dominated by a limited set of companies in 2023, are expected to diversify. “…with other sectors, perhaps including small-cap stocks and even emerging markets, beginning to participate more in the gains…But don’t expect this expansion to happen in two or three months. It will likely take all of 2024,” he contends.   

Additionally, Charles Schwab asserts that the theme of artificial intelligence (AI) will witness a shift in 2024. “We believe a theme in 2024 will be less about AI’s ‘creators’ and more about AI’s ‘adopters’—across the spectrum of industries and sectors—as companies increasingly focus their capital spending on productivity-enhancing investments,” says the asset manager.  

Meanwhile, Janus Henderson Investors foresees that the US equity investors in 2024 may fret over how to balance long-term objectives with more immediate needs. “In our view, such consternation is not necessary this time around as the optimal positioning required for both time horizons can be addressed by focusing on earnings quality,” says the asset manager.  

“Long-term investors should prioritise companies with a proven track record of quality earnings growth. This should be complemented with valuation discipline as potential volatile markets adjust to a new rate regime. In a rapidly evolving global economy, both components will be key to a successful investment strategy,” opines Janus.  

US Bonds

After a difficult 2022, US bonds have witnessed a rebound so far this year. How will the asset class fare in 2024? 

“US government bond yields, especially on longer-dated debt, hit multi-year highs in October. But more balanced Fed commentary and slowing US inflation has led borrowing costs to fall. We expect yields to decline further and quality bonds to rally in 2024,” states UBS Wealth Management.  

According to State Street Global Advisors, the prevailing policy-driven cycle supports a strategic overweight position in sovereign debt duration. This is based on the anticipation that lower rates and a bullish steepening have already been factored into the market. “We believe that the US Treasury market offers the cleanest way of capturing this move in market pricing,” says the asset manager.  

At the same time, Columbia Threadneedle Investments highlights opportunities in the country’s municipal bond markets.  

“Opportunities in municipal bonds are…attractive when you consider the effect of taxes, especially in high tax states, where tax-equivalent yields on high-quality munis create a further incentive. Underlying municipality fundamentals are generally healthy, but we’re cautious on high-yield munis, which are not offering yields that much higher than better quality bonds for the added risk,” informs the asset manager.