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January 02, 2024 at 12:45 PM
Related: Bob Doll’s 10 Predictions for 2023
Stocks likely face a tougher environment in 2024, according to Bob Doll, chief investment officer at Crossmark Global Investments, who recently predicted tepid corporate earnings growth for this year.
“We expect a more challenging backdrop for stocks in 2024, with softening consumer spending at a time when investor sentiment has turned bullish. Equities are richly valued, with volatility near historic lows, even as geopolitical and domestic political risks remain elevated,” he wrote in a recent newsletter.
The ability of the Federal Reserve and other countries’ central banks to maneuver a “soft landing,” curbing inflation without triggering a recession, remains the big economic question in 2024, Doll said.
The market expert doesn’t appear to be placing big bets that they’ll manage the feat.
“The consensus view of 2024 is a ‘Goldilocks’ environment; i.e., not too hot and not too cold. Expectations include a soft economic landing, a continued decline in inflation towards targets, and double-digit earnings growth,” he said.
“We think that fairy tale is unlikely,” meaning that either the economy weakens enough for a bumpy ride — perhaps a recession — and earnings fall short (the most likely scenario), or the economy remains strong enough to support double-digit earnings growth at the risk of little progress on inflation and Fed rate cuts, Doll explained.
“We expect the 2023 momentum and Fed cut euphoria to fade early in the new year, resulting in lackluster earnings growth and downside risk to equities as 2024 unfolds.”
The CIO noted the U.S. economy avoided a widely expected recession last year and made progress toward a soft landing, with unexpectedly strong economic growth amid declining inflation and a relatively stable, rebalancing labor market.
The economy now faces more symmetric risks for weaker activity and further “sticky” inflation staying above central bank targets, Doll said.
Check the gallery for Doll’s 10 predictions for 2024.
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