Wells Fargo Securities is formally out with its 2024 inventory market forecast.
Chris Harvey, the agency’s head of fairness technique, sees a risky path to his S&P 500 to 4,625 year-end goal.
“It is actually arduous to get excited. If we have now higher [economic] progress, then the Fed does not do something,” he instructed CNBC’s “Quick Cash” on Monday. “If we have now worse progress, then numbers are going to come back down after which the Fed will finally minimize. The second half will probably be higher, however the first half goes to be actually, actually sloppy.”
Harvey’s goal is simply 75 factors above Monday’s S&P 500’s shut.
“Can we go larger from right here? Certain, we will go slightly bit larger. However I simply do not suppose you may go a ton larger,” he mentioned. “Folks have talked about 5,000. I do not see the way you get to that degree.”
In his official 2024 outlook be aware, Harvey instructed purchasers to brace for a “dealer’s market” as an alternative of a “buy-and-hold scenario.” His early 12 months technique: Begin with a risk-averse stance.
“The VIX [CBOE Volatility Index] is up 13. Each time we have gone into a brand new 12 months with the VIX at 13, we have seen spikes. We have seen the fairness market pull again, and it is simply not a terrific setup into 2024,” Harvey added.
He warns the upper price of capital is a further market downside as a result of it prevents multiples from going larger.
“So long as the price of capital stays larger, it is actually arduous for me to get to a a lot larger worth goal,” Harvey mentioned.
But, he nonetheless sees alternatives for traders.
“What we need to do is we need to go to the locations which are oversold. We simply upgraded utilities immediately. We upgraded well being care,” Harvey famous. “These are areas which have good valuations, respectable fundamentals and most of the people actually aren’t there at this level.”
‘I hate to say that as being head of fairness technique’
Harvey additionally sees Treasurys as an possibility.
“For those who take a look at the options, there are issues which are fairly engaging. And, I hate to say that as being head of fairness technique, however you may park cash on the entrance of the curve and make a reasonably good charge of return and never placed on a complete lot of danger,” mentioned Harvey.
His 2023 S&P goal is 4,420 — which suggests a 3 p.c drop from Monday’s shut.
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