As 2023 draws to a close, Wall Street analysts are starting to look ahead to 2024. They generally have optimistic expectations for the performance of the US stock market next year and are optimistic that the S&P 500 index will continue to rise. However, some analysts have pointed out that the return on US bonds may be higher next year.
Vance Howard, CEO of Howard Capital Management, said on Tuesday that in 2024, the performance of long-term US treasury bond bonds may be better than that of the S&P 500 index.
In an interview with the media, Howard mentioned the recent increase of iShares 20+year treasury bond bond ETF. Howard started buying iShares 20+year treasury bond bond ETF a few weeks ago, which has risen 13% since the beginning of November.
"We have seen a very strong rebound in the bond market," he added. "I think this is very productive and positive, and I think people should really focus on bonds in 2024. It may be a better asset class than the S&P 500 index, although we believe the S&P 500 index will perform very, very well next year."
On Tuesday (December 26th), the US stock market opened high and closed high, with the three major indexes collectively closing higher. The S&P 500 index rose 0.42% to 4774.75 points, breaking the highest level since February last year. Since the beginning of this year, the benchmark index has risen by nearly 25%.
At present, the market is generally optimistic about the prospect of a soft landing of the US economy next year, and it is expected that the US stock market will further rise. Investment banks, including Bank of America, Deutsche Bank, and Goldman Sachs, have recently predicted that the US stock market is likely to set a new record in 2024. Their target price for the S&P 500 index by the end of next year is expected to reach up to 5200 points, nearly 10% higher than the current level.
The Federal Reserve's interest rate cut will stimulate a significant rebound in the bond market
As inflation continues to cool, Howard said he expects the Federal Reserve to cut interest rates three times next year.
Earlier this month, Federal Reserve officials hinted that interest rate cuts had begun to enter the picture, and the median dot matrix also indicated that interest rates would be cut three times next year.
Meanwhile, Howard stated that bonds are "currently in an incredible oversold state," and if the Federal Reserve starts cutting interest rates, it will stimulate a significant rebound in the bond market.
From 2020 to October this year, the US bond market suffered a historic collapse, but it has rebounded significantly in the past few months. Stimulated by the expectation of interest rate cuts, bond prices recorded their largest monthly increase in nearly 40 years last month, recovering their losses since the beginning of this year.
"I just think it's more cost-effective to buy long-term US treasury bond bonds now," Howard said.
Optimistic about technology and small cap stocks
Howard also stated that although technology stocks have surged this year under the leadership of the so-called "magnificent seven giants," he is still optimistic about the future performance of technology stocks.
He added that apart from these large tech giants, the P/E ratio of technology stocks does not seem too high.
"I think this market will be very, very attractive in the future, and Invesco QQ Trust may be an investment method that can slightly diversify your portfolio," he said. "I believe that as the upward trend spreads to other sectors of the market, small cap stocks' performance will also be very good."