The stock market has had a strong start in 2024, with the S&P 500 increasing by 14 percent in the first half of the year. However, market analysts predict that the pace of gains will slow down over the next 12 months, as per Bankrate’s Second-Quarter Market Mavens Survey. The analysts surveyed anticipate a 4 percent rise in the S&P 500 over the upcoming year.
These market experts foresee the S&P 500 climbing from around 5,461 at the end of the survey period to 5,663 by the end of the second quarter next year. This marks the 15th consecutive survey where the professionals have predicted a positive outcome. Additionally, they expect U.S. stocks to perform better than international stocks, and growth stocks to outshine value stocks.
Mark Hamrick, Bankrate’s senior economic analyst, stated, “The first half of 2024 will be challenging to replicate in the next six months. However, this could also be interpreted as the market having already achieved significant progress for the year.”
Hamrick added, “While our survey indicates some caution among professional investors for both the short and long term, I believe they would agree that attempting to time the market is a risky endeavor. This is a lesson learned from both recent and historical events.”
Key points from the Bankrate survey are:
Forecasts and analysis:
This article is part of a series discussing the findings of Bankrate’s Second-Quarter 2024 Market Mavens Survey:
- Survey: Stocks to gain 4% over the next year
- Survey: Market pros see 10-year Treasury yield under 4% a year from now
- Survey: Best ways to play falling interest rates, elections and AI, according to investing pros
Stocks to rise slightly over next 12 months, experts say
Following strong performances in 2023 and the first half of 2024, analysts in the Market Mavens survey project more subdued returns in the coming year. Respondents in the survey anticipate a 3.7 percent increase in the S&P 500 to 5,663 – up from 5,460.48 at the end of the survey period on June 28.
Hamrick stated, “Over the next year, it is likely that the Federal Reserve will ease monetary restrictions if inflation data continues to support a move towards the central bank’s 2 percent target. This could create a favorable environment for equities, but growth and earnings will also play a significant role.”
Analysts remain uncertain about the five-year outlook for stocks
Despite the market’s strong performance over the last 18 months, the experts surveyed by Bankrate remain unsure about the market’s performance over the next five years compared to its historical average returns of about 10 percent annually.
- 40 percent predicted that returns over the next five years will be lower than historical averages.
- 40 percent expected returns to be similar to historical averages.
- 20 percent believed returns would surpass historical averages.
These figures were compared with the results of the previous four Market Mavens surveys, as displayed below. Analysts provided reasons for their predictions.
“We are at a late stage in the economic cycle and valuations are high, indicating that more modest returns should be anticipated over the next five years,” stated Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
“It is only a matter of time before the U.S. economy slows down due to the Fed’s ‘higher for longer’ monetary policy,” said Sam Stovall, chief investment strategist at CFRA Research.
Other analysts see the potential for lower interest rates to bring returns closer to their historical averages.
“Market returns have been strong in recent years as valuations have expanded,” noted Patrick O’Hare, chief market analyst at Briefing.com. “Starting from higher valuations could limit return prospects, but with lower rates expected, we should be able to achieve total returns in line with historical averages.”
U.S. stocks are favored over global stocks, according to experts
While U.S. stocks are typically preferred by the respondents of the survey, they are overwhelmingly favored in this quarter’s results:
- 90 percent of respondents favor U.S. stocks over the next year.
- No one prefers international stocks.
- 10 percent believe that returns from both will be similar.
In the first quarter, 83 percent of experts anticipated U.S. stocks outperforming international stocks, with 17 percent expecting similar returns and none preferring international stocks.
Various reasons were cited for the preference for U.S. stocks, with the tech exposure in the U.S. being a significant factor.
“The U.S. remains the most dynamic equity market due to its technological innovation leading the world,” stated Dec Mullarkey, managing director at SLC Management. “U.S. companies have maintained high margins and delivered robust growth during challenging periods. As inflation eases and rates decline, the U.S. equity market is well-positioned for continued growth.”
“The U.S. offers better growth prospects, and U.S. indices provide exposure to a variety of technology-related companies that are unmatched anywhere else in the world,” Samana from Wells Fargo noted.
Some analysts expressed concerns about elevated valuations in the U.S.
“The U.S. has outperformed, but valuations are stretched,” O’Hare mentioned. “Foreign markets may have lower valuations, but it won’t be a zero-sum game in terms of investment returns over the next 12 months.”
Market pros maintain a preference for growth stocks over value stocks
With the U.S. economy remaining robust, most experts anticipate growth stocks outperforming value stocks in the next year.
- 30 percent of respondents favor value stocks over growth stocks in the next year.
- 60 percent believe growth stocks will outperform value stocks.
- 10 percent expect returns to be similar.
The percentage of respondents favoring growth stocks increased to 60 percent from 50 percent in the first quarter survey, while the percentage favoring value stocks slightly decreased.
“With the Fed likely to normalize rates, equities should benefit and perform well,” Mullarkey stated. “Earnings are improving, and margins remain strong, providing room for valuation growth, which is a key driver of growth stock outperformance.”
Michael Farr, president and CEO at Farr, Miller & Washington, also foresees growth stocks continuing their outperformance.
“The trend favors growth stocks,” Farr concluded. According to Samana, the market is expected to see a broadening of performance in the upcoming year, with both growth and value stocks showing similar returns. He believes that with broader economic and earnings growth, a wider group of leaders will drive the market higher.
Other analysts also see potential in value stocks, citing their attractive pricing and potential for outperformance. O’Hare specifically mentions that value stocks have the prospect for the greatest returns in the next 12 months, despite the current performance gap with growth stocks.
In the current economic climate, if growth holds steady and interest rates decrease, O’Hare believes that value stocks will offer the best return prospects. Lieberman concurs, stating that value stocks are simply undervalued compared to growth stocks.
The methodology behind these insights was based on Bankrate’s survey of stock market professionals in the second quarter of 2024. The survey included responses from a range of experts, including Samana, O’Hare, and Lieberman, among others.
It is important for investors to conduct their own research before making investment decisions, as past performance is not indicative of future results.