What's Wall Street expecting for 2024?

Of course, no one can predict the future — and that goes for the stock market, too. But each year, experts still put out their best guesses for what the year ahead may hold for investors. As CNN Business explains, towards the end of every year, "economists from banks, asset management companies, research firms, hedge funds and everything in between release their outlooks for the year ahead." This time around, "predictions have been all over the place" — though it's still possible to spot some "common themes" in what may lay ahead.

As The New York Times underscores, you shouldn't overhaul your investment approach based on these predictions, given "there is no evidence that anyone can predict the market's movements reliably, and a great deal of evidence that buying and selling stock on the basis of your views about the market's impending movements is a fool's game." Still, these expert predictions can provide some grounding for the year ahead and help you know "the key issues to keep an eye on," per Investopedia.

There are high hopes for rate cuts

In its final meeting of 2023, the Federal Reserve acknowledged that it expects to slash rates in 2024, a major shift from its inflation-fighting efforts in recent years that have entailed a series of rate hikes. Already, Wall Street is banking on those rate cuts — and they're hopeful they'll go beyond what the Fed has projected.

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According to CNN Business, the CME FedWatch tool indicates that "investors now see 6 to 7 rate cuts next year," though the Fed has only "signaled the possibility of three rate cuts in 2024." Further, per Investopedia, "the market is pricing in nearly a 99% chance that the benchmark rate will be at least a full percentage point lower by the end of next year, with a 70% likelihood it will be a full 150 basis points lower" — although "Fed officials themselves are only projecting a 75 basis-point reduction."

A recession isn't on the horizon

According to The New York Times' DealBook, "analysts see lower borrowing costs, a soft landing (that is, an economic slowdown that avoids a recession) and a pretty good year for investors." While there is no consensus on whether 2024 will bring a bull market or a bear market, "most economists believe that the U.S. will avoid a recession," reports Investopedia.

One reason for this outlook is the state of the housing market. "Nearly every recession since WWII has been characterized by a housing crash, but here we have a shortage of housing. So the chance of a recession is remote in our opinion," Jay Hatfield, CEO of investment firm Infrastructure Capital Advisors, told CNBC Make It.

The outcome of the election is a question mark

Perhaps it's no surprise, but Wall Street is just as stumped as the rest of us on what the results of this year's presidential election may be. "The election will not be a story in the stock market, up until November 2024, for the simple reason that the stock market will not know who’s going to win the election until November 2024," David Bahnsen, the founder and chief investment officer of the wealth management firm Bahnsen Group, told The New York Times' DealBook.

What does that mean for investing? According to Investopedia, citing First Trust, while a presidential election year "usually brings headline volatility to the capital markets, the stock market has been higher 19 out of the last 23 election years, or 83% of the time." 

Adding to that optimism is the fact that in the last 71 years, "the S&P has risen, on average, by 7 percent during U.S. presidential election years," and "the market tends to do even better in a re-election year," the Times reports, citing market analysis by LPL Financial. Further, notes the Times, even with "some uncommon questions swirling" over the upcoming election, the race is "unlikely to add much volatility to the markets, Wall Street pros say."