Stock prices face “unequal and fragmented” in 2024
Wall Street widely expects the Federal Reserve to keep interest rates on hold when central bankers announce their policy decisions later this week.
However, that does not mean that the rise in stock prices will continue next year.
Investors expect the Fed to achieve a soft landing and begin lowering interest rates in 2024. That scenario is still possible, but a rate cut could also lead to a slowing or contraction of the economy, which would put stocks in a different environment than they are in now. Greg Marcus, managing director at UBS Private Wealth Management, wrote in a note Monday.
He said the “unequal and fragmented” stock market “has different winners and losers in every sector, and next year will be different for individual stocks.” Even if the Fed ends its tightening campaign, interest rates will still remain higher than they were during the favorable 0% interest rate era.
“Investors will be more focused than ever on rewarding companies that show signs of growth and avoiding unprofitable, speculative companies,” he said, adding that in the 2010s, when fundamentals are more hectic. He emphasized that he would play a larger role. In 2024, investors will be more discerning from the chaff, he said.
“Markets are already high right now and the economy has proven resilient to rate hikes this year, but that won’t continue indefinitely,” Marcus said. “Interest rates will fall, but are still expected to be higher in the long term, and not all businesses will be able to survive this environment.”
