Geopolitical risk lashes the Magnificent Seven. The IPO machine roars back. Japan emerges as the world’s best developed market.
After Byron Wien passed away last year, Bank of America Corp. is the latest to pay homage with their own version of the Wall Street forecaster’s annual list of potential market surprises for 2024.
Another potential wildcard: Stocks luring back investors all thanks to high bond taxes – that’s at the top of the list according to the bank’s strategists led by Jared Woodard.
And despite the most aggressive rate-hiking cycle in decades, companies could sidestep a surge in bankruptcies, they said.
“This year any large moves in markets may be self-limiting. Big drops in stocks could prompt Fed cuts; big rallies further ease financial conditions and rekindle the very inflation that the Fed thought it had smothered,” the strategists wrote. “It’s a recipe for a range-bound, if volatile year, at least in the US.”
For now, they favor credit over equities and bonds in case of more market swings and warn traders not to get “shaken out” of inflation hedges.
Wien, the longtime market strategist whose annual list of “10 Surprises” made him one of the most influential voices on Wall Street during a career at Blackstone Inc. and Morgan Stanley, died in October. Since 1986, his annual surprises list has compiled potential market shocks that Wien saw with a better-than-expected chance of happening.
Many market prognosticators, including Wien, were caught wrong-footed last year by predictions that the US stock market would bottom in 2023.
Instead, the S&P 500 jumped 24% while the tech-heavy Nasdaq 100 surged nearly 54% — its best annual gain since the dot-com boom of the late 1990s.
“It’s a worthwhile exercise to think of scenarios that some investors may have not considered, or have assigned a very low probability,” BofA strategists wrote.
BofA strategists’ other predictions for 2024:
• Consensus calls for the US to walk a narrow path to 2% inflation, strategists see “one hundred paths to 5%.”
• Investors will demand a premium to own longer maturity US government debt as the prospects for the budget deficit worsen.
• A comeback in biotech and pharmaceutical stocks will be propelled by advancements against Alzheimer’s disease following a lackluster run in 2023.
• Investors will get more realistic about “the need for reliable, affordable power.”
• As the US presidential election nears, the prospect of a more business-friendly environs will be “stoking animal spirits and prompting a greater allocation to equities.”
This article was provided by Bloomberg News.