If the 2023 stock market was an all-in party, the 2024 market is more likely to resemble a get-together with a few friends.
"The S&P 500 was up by close to 20%" last year, says Chris Hopkins, co-founder and principal at Chattanooga-based Apogee Wealth Partners. "The outlook for 2024 isn't as good, which is to say we're not going to see another 20% gain. I would say stocks are certainly fairly valued -- and then some."
Hopkins, who doubles as a personal-finance columnist for the Chattanooga Times Free Press, points out that last year's extraordinary market gains were due primarily to the so-called "Magnificent Seven" -- Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.
"There was as huge increase in those high-tech companies," he says. "The Magnificent Seven accounted for 90% of (last year's) gain. The others were up only marginally."
Hopkins says consumer spending was the reason the American economy grew by 3.5% in a year the Federal Reserve raised interest rates and many economists had predicted a recession. Hopkins says that if there's a recession in 2024, it will likely be short and shallow.
"The Fed is trying to pull off that 'soft landing,' lowering inflation without triggering a recession," he says. "If they stick this landing, they will have pulled off a real triumph."
Jim Place, managing partner at Chattanooga-based Evergreen Advisors, says he sees an "average to pretty good" year ahead, but adds that there are caution signs that shouldn't be ignored.
"The money supply has shrunk 3.5% in the last nine to 12 months," he adds. "That's a big contraction. My only concern about 2024 is whether the contraction of the money supply will have an impact on the economic environment. Historically, it always has.
Photo by Olivia Ross / Jim Place of Evergreen Advisors."Do I see a massive downturn? Probably not," he says "I think the Fed is serious about lowering rates two or three times this year. They're very interested in pulling off that soft landing. But if they're too aggressive, we could return to an inflationary environment."
When it comes to an investment strategy, Place says, the fundamentals are the fundamentals for a reason.
"No different than any other year," he says. "Take a look at where you are, assess your goals and objectives, tune out the noise, and then apply the SWAN principle, what it takes for you to 'Sleep Well at Night.' What can you live with? Your portfolio needs to reflect what you're willing to stomach."
Hopkins cautions investors against the temptation to overreach in an effort to "time the market."
"We all wish we could," he says. "If we could, we'd all own our own islands.
"The best thing is to rebalance," he says. "If you didn't do anything in 2023, the stock portion of your portfolio has grown disproportionately versus bonds. Sweep some of that (stock gain) out and rebalance. If you were 60-40 (stocks to bonds) and now you're 70-30, reset to 60-40. Having a little cash right now is not a bad thing."
Hopkins adds that conflicts around the world pose a "real risk to markets, and the economy in general," and bear watching.
"If we lose our nerve in terms of backing our allies, it could embolden China in Taiwan," he says. "If the world perceives that we're ceding our role as a world leader, it could mean a decline in the dollar and a return to an inflationary environment.
"That's a risk you can't take off the table," he says.
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