Andrew Slimmon, Senior Portfolio Manager for US Equities at Morgan Stanley, said that as investors increasingly pour out cash to buy stocks in pursuit of a rebound, the US stock market may continue to rise next year, and the S&P 500 index is now almost back to early 2022 levels.
"We haven't made any progress for two years. I think you'll see people being more optimistic because they think they might miss out on earning opportunities," he added.
Slimmon emphasized that the US economy will not collapse under the pressure of the Federal Reserve's aggressive interest rate hikes, and he is optimistic about the stock market in 2024. Nevertheless, he still expects a pullback in the US stock market before the end of next year.
He said that although the Federal Reserve can lower interest rates next year without a recession after suppressing inflation, pessimists may create some anxiety in the stock market because they are concerned that the Fed's move will be a signal that it has "seen danger in the economy.".
"I think the economic situation is good, and the market will eventually realize that they are cutting interest rates because the inflation cycle has ended, not because the economic cycle has ended. However, I wouldn't be surprised if there is some degree of pullback when the Federal Reserve really starts cutting interest rates," he added.
In his view, the market will rise again in 2024, but it will not be as good as this year.
So far this year, the S&P 500 index has risen by nearly 25%. In early October, as the index was about to decline for the third consecutive month, Slimmon predicted that the stock market would experience a significant rise dominated by technology stocks in the fourth quarter. According to FactSet data, the index has accumulated an increase of 11.2% so far this quarter.
Last week, after the Federal Reserve announced its interest rate decision and Powell held a press conference, Slimmon said, "I had no expectation that Powell would make such a change." Although he expected the Federal Reserve Chairman to shift to a "dovish" stance due to declining inflation, he did not expect Powell to turn to interest rate cuts in 2024.
Slimmon said that after large technology stocks drove the S&P 500 index up in 2023, "everyone believes that market hotspots will overflow next year." He said that the "tech seven" may continue to rise in 2024 because their profitability is "very good," and they will "repurchase a large number of stocks" next year.
According to him, after a significant increase in 2023, these stocks are likely to lead again next year.
Slimmon stated that he still enjoys holding growth stocks as well as value stocks in the financial and industrial sectors.
He predicts that the US stock market will rebound after the S&P 500 index breaks through its record closing point in early January 2022, and suggests that the index may reach 5000 points by the end of 2024. In his view, if the Federal Reserve cuts interest rates and triggers some unnecessary concerns in the market, the US stock market may experience a pullback.
But he said, "I am very encouraged because the economy is still growing. After profits remain stable year-on-year, we see a recovery in profits."