3 factors that will drive the stock market up in 2024

• According to Wall Street strategists, there are three factors that will boost stock prices in 2024.
• These are the Fed’s interest rate cuts, the US economy’s soft landing, and the possibility of increased productivity through AI.
• Major banks predict that the S&P 500 index could hit a new all-time high by the end of 2024.

Wall Street strategists are betting on stocks rising in 2024. That’s because there are three bullish factors driving the stock price higher.

Optimism continues to grow among investors, even though the threat of recession persists and inflation remains persistent. Bank of America, Deutsche Bank and Société Générale predict the S&P 500 index will hit a new all-time high in 2024.

Let’s discuss three bullish factors that could drive the stock higher.

1. Fed will likely lower interest rates

The market is confident that the US Federal Reserve will lower interest rates in 2024. Historically, developments like this have pushed up stock prices significantly.

And the bet on lower interest rates is becoming pretty solid as 2023 draws to a close.

The inflation rate has been steadily declining, dropping to 3.2% in October. The overheated labor market is also easing, with fewer job openings and fewer new jobs joining the latest private payroll report. The market is focused on the non-farm payroll numbers released on December 8th and the November inflation rate released on December 12th.

The Fed could cut interest rates six times in 2024 as prices continue to fall, according to ING Economics. ING’s chief international economist James Knightly predicts it will end up being a 1.5% rate cut.

However, UBS strategists’ forecast is even higher, calling for a rate cut of 2.75%. That’s because the Fed is moving into “full easing” mode.

2.US economy remains strong

By raising interest rates this much, the Fed has given itself the ammunition to provide the necessary stimulus should the economy begin to slow. But with the economy on the mend heading into 2024, the Fed may not need to do much.

On Wall Street, expectations for a soft landing are widespread, with Goldman Sachs lowering the chance of a recession to 15%.

BMO Wellness Management sees the probability of a recession as less than 40% and puts the probability of a soft landing at 60%.

“Our forecast for two or three Fed rate cuts in 2024 is based on the current “We are less optimistic than market valuations, but as long as a soft landing prevails, direction is more important than pace.”

Ned Davis Research puts the chance of a soft landing, in which the economy slows without going into a recession, at 70%, even higher.

“A soft landing should continue the cyclical bull market. Our forecast is for the S&P 500 to end 2023 at 4,900, about 7% above current levels.”

3. AI increases productivity

Wall Street’s hype about AI will finally become a reality as generative AI increases economic productivity. BMO’s Ma says the stock should rise through 2024.

“The most notable upside for the economy and stock markets is that the widespread use of AI could significantly boost productivity beyond 2024. It is defining the economy of 2023 and will continue to be so in 2024.”

Goldman Sachs predicted in June that the spread of AI will increase the annual growth rate of labor productivity in the United States by about 1.5 percentage points over 10 years. The stock market will benefit greatly from this, with the stock market expected to rise by as much as 14% from improved productivity through AI.