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Stocks roar out of the gate in 2024, but can the rally last?

Will the rally continue? All signs say it could.

The stock market kicked off the year in style, blasting past its previous all-time high in just 21 days. This marks the second time the index has reached new heights in 2024, a stark contrast to the two-year wait following January 2022’s peak.  This was a result of tamed inflation, halt to rate hikes, and decent earnings reassuring investors about the economy’s health.

But last year’s rally was dominated by the Mag 7. Now, investors seek a broader market breakout.  Investors are looking for the broader market to start to participate more significantly than in 2023.

Earnings growth takes center stage: Companies with strong revenue, cost controls, and strategic pricing are poised to win. Estimates project 7.4% year-over-year earnings growth for S&P 500 companies in the first quarter.  For 2024: Analysts expect 11.1% growth, exceeding 2023’s modest 3.1%.

Healthy margins gain focus: As interest rates stabilize and optimism expands, valuations (PE ratios) could rise for companies with healthy profit margins.

Consumer confidence echoes optimism: The University of Michigan Consumer Sentiment Index surged to 89.4 in January 2024, its highest level since January 2022 and a 28% increase since November 2023.

Strong GDP expectations add fuel with GDP growth projections between 2.5% and 3.5% for the 1st quarter and 3-4% for 2024.

While the current market climate looks favorable, some uncertainties remain. Potential risks include unexpected inflation spikes and geopolitical issues.

The market has entered 2024 with a strong momentum, but navigating the path ahead will require a disciplined and patient approach for opportunities and with risk management always being a priority. 

Key Points:

  • Focus on broader market: The rally is expected to widen market participation and opportunities.
  • Earnings and margins: Companies with strong fundamentals and earnings growth will begin to participate with increased interest and valuations.
  • Favorable economic climate: Stabilizing interest rates and growing optimism
  • Strong consumer sentiment: Consumers are still spending and confident about their economic position.
  • Positive GDP expectations:  Forecasts indicate growing economic expansion.

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