Wells Fargo Securities’ head of equity strategy, Chris Harvey, has laid out the firm’s 2024 stock market forecast, envisioning a volatile path for the S&P 500 with a year-end target of 4,625. Harvey suggests a challenging environment: “If we have better [economic] growth, then the Fed doesn’t do anything. If we have worse growth, then numbers are going to come down, and then the Fed will eventually cut. The second half will be better, but the first half is going to be really, really sloppy.”
While Harvey’s target is just 75 points above the current S&P 500 close, he remains cautious about the market’s potential to rise significantly, saying, “Can we go higher from here? Sure, we can go a little bit higher. But I just don’t think you can go a ton higher… People have talked about 5,000. I don’t see how you get to that level.”
He advises clients to brace for a “trader’s market” rather than a “buy-and-hold situation” in 2024. Harvey emphasizes a risk-averse stance, considering the VIX (CBOE Volatility Index) is up 13, indicating a potentially unfavorable market setup. The higher cost of capital is seen as an additional market challenge, hindering the possibility of higher multiples.
Despite the caution, Harvey identifies opportunities for investors, suggesting a move towards oversold areas. He recently upgraded utilities and healthcare, citing good valuations and decent fundamentals. Additionally, he sees Treasurys as an option for investors looking for alternatives, acknowledging that parking money at the front of the curve can provide a reasonable rate of return with less risk.
Harvey’s 2023 S&P target is 4,420, implying a three percent drop from the current close.
