Many analysts and forecasters believe the FED will pivot and ease interest rates by mid-summer 2024. That is only about 6 months from now. Some are even calling for rate cuts in about 3 months.
The lagging effects of the crippling rate hikes is having an effect which ensures inflation is put down. The decision is entirely political so we can’t say for sure how it will play out, which means any forecast is taking politician’s points of view and likely behavior ahead. The recent rally is telling us a lot about investors collective beliefs.
“Looking at all periods back to 1950, there have now been 31 occasions where the S&P 500 has gained over 8% in a month,” Turnquist wrote in a separate note published Thursday. “The average return a year later, from the end of the strong month, is almost 16%. This is significantly higher than the average for 12-month periods that followed months where stocks returned less than 8%.” — Adam Turnquist, chief technical strategist for LPL Financial
Here’s a few reasons why business profits and the economy will be better in 6 months:
- US technology is progressing very providing significant productivity gains to major corporations
- US has a massive advantage in cloud computing and generative AI
- corporate profits will rise as economy resumes
- trade protections from China predation, will encourage investment in US companies
- oversupply of oil and natural gas provides a 6-month window of lower energy costs
- lower rates allow housing market to start again
- consumers will be able to refinance at lower rates
- massive trillions will move out of money markets to equities
- equities investing will become more in vogue as everyone wants to get into the excitement
- momentum on the NASDAQ, S&P, and Dow Jones is significant and will keep rising
- earnings are expected to increase 3.2% in the fourth quarter 2023
- the risk of a hard landing has been downgraded
- historical trends point to a bullish six months ahead
- Democrat spending bills still flooding cash into the economy
Good Stocks to Buy
FOMO investors are scambling to play catch and find some worthy stocks to buy that still have big room to grow. There are plenty of rising stars on the Russell2000 and S&P small caps list, but let’s look at one stock that might be very popular as the economy slows — Amazon (AMZN).
Markets are rocketing right now, with the Dow Jones, , and NASDAQ all heading toward record heights, particularly in 2024. Sure the economy is cooling, and that’s what setting the stage for lower lending rates. In fact, signs are the economy is cooling fast, so rates drops could happen by spring, to avoid an unnecessary recession and hard landing.
Investors, including FOMO investors are hunting for the best stocks to buy now or in the next 3 months, to get ahead of this big jump coming over the next 16 months. Longforecast a market research forecasting firm that forecasts markets and major stocks believes the peak of this new bull market will happen in the spring of 2025. Interestingly, that is not far after the November 2024 election.
A prediction for the economy is one of strength given a new pro-US economy is developing, driven by leadership in AI technology, advanced microchips, and demand from a massive Millennial population who have delayed much of their lives due to political survival tactics by the Democrats. D’s have tried to suppress demand as part of their political platform, but it’s normal demand and can’t be stifled for long.
The fact American consumers and businesses have money is one thing ($5 to $6 Trillion in money markets), but being able to borrow again at low rates, and refinance debt and obtain home loans at a much lower rate will free up a stunning amount of money for other purchases. That may include automobiles, travel, and a home purchase. For sure, the housing market will get heated as buyers compete for in a grossly undersupplied real estate market.
By 6 months from today, the US economy will have much more momentum, as it passes out of this slowdown or soft landing. Longforecast is calling for a strong January and February, which means this bull market rally is not over.
The 6 Months Ahead: Volatile, Uncertain, Contentious
Yet, the markets have been volatile the last 6 months, as the chart from Google Finance depicts. As speculation reigns about where we’re headed, there will be many catalysts for ups and downs in prices throughout 2024, as the economy frees itself from the FED shackles. That will appeal to the day traderswho earn a lot from volatility and swing trading.
We still have the debt and trade deficit crisis to deal with and geopolitical strife and competition with China will present hurdles for US growth, however the path appears fairly true to a great recovery from the last 3 years of misery.
Q4 2023 and Q1 of 2024 have turned out not to be a subdued period given the certainty of the markets that the FED will pivot. That’s sped up the urgency of investing now. If you invest for H2 2024 and 2025, you’re can pick up some lagging stocks that will rocket from the bottoming values.
Consider that continued spending bills will support inflation thus the FED can’t lower the interest rate. High rates would erode the economy, and that rate could go higher, as mentioned by J Powell in the September FED meeting.
What’s good to hold right now? Oil stocks and natural gas stocks are good picks. Take a good look at the Southwestern Energy, BP and Exxonforecasts.
Of course, some believe in a 2024 recession and stock prices will fall. Definitely, over the next 6 months, corporate earnings will be challenged. Trading Economics future outlook is surprisingly negative which hardly makes sense as the FED rate falls. They’re disconnected from the points I made above, that signal much stronger performance as forecasted by LongForecast.com.
Ask what the spending reductions would do to the economy and how investors would respond to lower interest rates.
We’re waiting for US Companies to be freed from their shackles to produce, process, manufacture and transport products to world markets.GS seems to believe the FED won’t overshoot, when it appears they fully intend to.
Their prediction comes after a positive consumer sentiment report, falling inflation numbers, strength in the housing market, and an ongoing boom in factory building in the U.S. Hatzuis believes inflation will ease further in Q4 which it almost certainly will do.
For the last half-year forecast period take special note of:
- government spending levels
- Fed rate 2024 intentions
- S&P 500 corporate earnings
- BLS employment and earnings trends
- Russell 2000 small business trends (looking good again)
- energy prices (oil prices and natural gas prices)
- rising US dollar
- deepening economic and political rift with China
- dangerous new deals with enemy countries by Biden
The NASDAQ and the are still up 26% and 12% respectively this year to date, while the Dow (+2.3) and Russell 2000 (+.5%) have been badly injured by high rising rates, balance sheet tightening, and the global economic slowdown. The path ahead may be volatile yet the markets are performing well beyond expectations, which were for 1% to 3% growth.
Not mentioned by Goldman Sachs and media outlets, is that a 2024 recession would cost the Democrats their Presidential re-election bid. Which means they will need to prevent a recession. This guarantees they will refocus on supporting the US. The border crisis with record numbers of illegals flooding the southern border is weighing on cities who will run out of money to support them.
We’ve had rolling recession this year and that will likely continue in Q1 2024. The lagging effects are happening but will likely stop when the FED lowers the interest rate.
All the trillions in the money markets will be poised to move to US stocks to feed US company productivity and ingenuity, and reignite wages and inflation. The FED will try to keep the brakes on, until they’re ordered to let go.
It’s a key stock in the NASDAQ, over-weighted, and if it falls, there’s not much to replace it. The magnificent 7 will not be so glorious at some point, regardless of what Tom Lee thinks. The FED really wants to sink this ship fast.
Market volatility won’t be disappearing anytime soon. This is mostly due to political strife and how the US government is mismanaging a number of critically important issues such as:
- Debt ceiling crisis — paying high debt payments in a higher interest rate environment ($33+ Trillion Debt)
- Excessive trade deficits — dealing with China professionally and avoiding trade wars
- Hampering of US productivity — supporting US manufacturing and commercial activity
- Out-of-control government spending – threatens more debt and credit downgrades for the US government
- High-interest rates as inflation cools slowly — overshooting aim and launching a recession
Macroeconomics suggest the next 6 months won’t be good for stock valuations and this dip might be the right time to buy the bottom. Few have confidence in the NASDAQ stocks it appears.
Again the headlines back before the New Year said this below. CNN got it right and Yahoo Finance couldn’t get it right. At this point, the next 5 month period leads us to the end of the year.
Goldman Sach’s Outlook 2023
Goldman Sach’s David Kostin reported their outlook for 2023 is for less pain but less gain. They believe zero earnings growth translates to zero stock price growth. They predict 2023 S&P 500 earnings per share will stay at $224 and the index will finish at 4,000, by end of 2023. Goldman’s three-month target for the P is 3,600. They are suggesting a soft landing for the economy.
“Our strategists expect the benchmark to fall about 9% in the next three months before rebounding after the Federal Reserve’s tightening cycle ends in May…Our strategists favor stocks that aren’t as sensitive to changes in interest rates, like companies in healthcare, consumer staples and energy.” from news release on Goldman Sachs website.
With the lower price of energy, vast amounts of US consumer cash ready to spend, and strong corporate balance sheets, it’s not surprising October, November and December will post strong results.
What’s unsettled is how the energy market will play out, how much further rate hikes can go, and whether China will grow.
This 6 month outlook is a pivotal one for investors, providing the context for longer term, 5 year to 10 year investment horizons. Today, this week to 3 months can be misleading but six months gives us a better benchmark. The current market rally in October provides further context for smart investors who see predictions as vital information.
Month by Month Projections (Forecasts.org)
Forecasts.org sees the path ahead as volatile, ultimately with the Dow falling 2000 pts to 32,660.
Trading Economics US GDP Forecast
Trading economics offers their forecast for various GDP factors. Their 6 month outlook is dour for the rest of the year with only slight improvement in early 2024 (1% to 2%), with a downgrade from that point on.
The Economy Will Grow very Slightly
The Economic and Strategic Research (ESR) Group sees GDP contracting 0.7% (annual) in the 4th quarter. They expect real GDP growth to slow but still reach 2.9% growth in 2023.
| Stats courtesy of BEA | 2022 | 2020* | 2021 | 2022 | 2023 | |||
| IV Q | I Q | II Q | III Q | ANNUAL | ANNUAL | ANNUAL | ANNUAL | |
| Real GDP | 6 | 2.2 | 3.1 | 2.9 | -3.4 | 5.6 | 3.5 | 2.9 |
| Real Disposable Income | -3 | 0.5 | 1 | 1.5 | 6.2 | 2.3 | -2.7 | 2.2 |
| Real Consumer Spending | 4.7 | 2.6 | 2.9 | 2.4 | -3.8 | 8 | 3.4 | 2.6 |
| Residential Investment | 0.5 | 2 | 3 | 2.5 | 6.8 | 9.1 | -0.2 | 1.5 |
| Nonresidential investment | 3.3 | 5 | 5.2 | 4.8 | -5.3 | 7.4 | 4.5 | 4.4 |
| Inventory Change (bln chn ’12$) | 50 | 55 | 60 | 65 | -42 | -68 | 61 | 40 |
| Total Gov’t Spending | 2 | 2.5 | 3 | 3.8 | 2.5 | 0.8 | 2.3 | 4.2 |
| Exports | 13.2 | 2 | 6.1 | 5.1 | -13.6 | 4 | 4.7 | 4.4 |
| Imports | 12.1 | 6 | 6 | 5 | -8.9 | 13.6 | 6.8 | 4.1 |
| Unemployment Rate (%) | 4.2 | 3.8 | 3.6 | 3.5 | 8.1 | 5.4 | 3.1 | 3.3 |
| PCE Inflation (%Y/Y) | 5.5 | 4.7 | 3.7 | 3.1 | 1.2 | 3.9 | 3.6 | 3 |
| Core PCE Inflation (%Y/Y) | 4.5 | 4.4 | 3.7 | 3.2 | 1.4 | 3.3 | 3.6 | 3 |
The 6 month timeframe for the DOW, , NASDAQ and Russell Indexes. is a good one for what’s expected to be a hot period, the last 6 months leading to what might be a record holiday season.
Over the June to December forecast period, we’re going to see more stock market index records. The are poised to reach their respective records soon. Sure there’s debt based crash talk and volatility test investors convictions. Yet, the momentum is clear and any inflation that occurs might encourage more investment (bond market hates inflation).
Take a good look at the fastest gaining small, mid and large cap stocks with an eye on safety and hedging. Experts believe the market will cool, but they’ve been saying that for years, so you have to take their predictions and projections with a grain of salt. See more on the best tech stocks, 5G stocks, and oil stocks.
Quick Links: Stock Market Tomorrow, next Week, Dow Jones Forecast , NASDAQ Forecast, Stock Market Correction, Don’t Buy These Stocks, Best Stocks to Buy, and Stock Trading.
CBO Report: Positive for 5 Years
“Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its pre-pandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024.” — CBO Overview of the Economic Outlook: 2021 to 2031.
The final word on the forecast for the next 6 months is volatility, political squabbles, government debt, and a FED that may not take mercy on the US economy in a self-absorbed obsession that’s proven wrong before.
See more on the 2023 2024 2025 Market Projections
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