Stocks will hit an all-time high in the first half of 2024, but then fade as the year goes on, said Bob Doll, chief investment officer for Crossmark Global Investments, a faith-based financial and money management firm based in Houston.

In response to market conditions, investors should seek out high-quality value stocks, along with some less expensive growth stocks, Doll said while discussing his annual New Year’s predictions during a webinar. Investors should hold some small-cap stocks, but they should not be overweight in them, he added.

Investors should focus on stocks with good earnings predictability and strong cash flows, he said.

Investors and advisors should expect a continued bumpy ride in 2024 and be prepared to buy during the dips and do some trimming on over-weighted stocks during rallies, he said. Diversity across asset classes and geographies, including non-U.S. allocations, should also be a priority.

Doll released his 10 predictions for 2024 earlier this month. He noted that half of his predictions from last year were wrong.

“We’ve had five wrong before, but never more than that,” he said. The biggest miss for Doll—and many other economists—was his prediction that a recession would hit the economy in 2023. That didn't happen, but he says a recession is likely this year.

In other areas, Doll said inflation will continue to slow this year, “but the Federal Reserve Board’s target of 2% may be elusive,” he said.

The Fed will begin to lower interest rates, but not to the extent some are expecting, and corporate earnings growth will not be in the double digits as some have predicted, Doll said.

World conflicts and tensions will create uneasiness among investors but will not profoundly impact the markets, he said. Likewise, the U.S. election will increase political polarization domestically but not have a large impact on the markets, he predicted.

Doll said investors should look for energy, financials and consumer staples and avoid utilities, healthcare and real estate.

Investors should look for high-quality stocks with higher earnings, good cash flow, and inexpensive cyclicals in larger companies. “Small-cap stocks are cheap now but they do not tend to do well in economic deceleration,” Doll said.

A recession is still likely to hit investors this year because of the inverted yield curve, he said. The lag time to a recession from the time the yield curve switches is historically 18 months, which would be this coming spring, Doll said.

The unemployment rate will edge above 4.5%, he said.