Wells Fargo Securities is formally out with its 2024 inventory market forecast.
Chris Harvey, the agency’s head of fairness technique, sees a unstable path to his S&P 500 to 4,625 year-end goal.
“It is actually onerous to get excited. If we’ve got higher [economic] progress, then the Fed would not do something,” he informed CNBC’s “Fast Money” on Monday. “If we’ve got worse progress, then numbers are going to return down after which the Fed will finally lower. The second half shall be higher, however the first half goes to be actually, actually sloppy.”
Harvey’s goal is simply 75 factors above Monday’s S&P 500’s shut.
“Can we go larger from right here? Positive, we are able to go a bit bit larger. However I simply do not assume you’ll be able to go a ton larger,” he mentioned. “People have talked about 5,000. I do not see the way you get to that degree.”
In his official 2024 outlook observe, Harvey informed shoppers to brace for a “dealer’s market” as a substitute of a “buy-and-hold scenario.” His early yr technique: Begin with a risk-averse stance.
“The VIX [CBOE Volatility Index] is up 13. Each time we have gone into a brand new yr with the VIX at 13, we have seen spikes. We have seen the fairness market pull again, and it is simply not an incredible setup into 2024,” Harvey added.
He warns the upper price of capital is an extra market drawback as a result of it prevents multiples from going larger.
“So long as the price of capital stays larger, it is actually onerous for me to get to a a lot larger worth goal,” Harvey mentioned.
But, he nonetheless sees alternatives for buyers.
“What we need to do is we need to go to the locations which are oversold. We simply upgraded utilities at this time. We upgraded health care,” Harvey famous. “These are areas which have good valuations, respectable fundamentals and most of the people actually aren’t there at this level.”
Harvey additionally sees Treasurys as an possibility.
“When you take a look at the options, there are issues which are fairly engaging. And, I hate to say that as being head of fairness technique, however you’ll be able to park cash on the entrance of the curve and make a fairly good charge of return and never placed on an entire lot of threat,” mentioned Harvey.
His 2023 S&P goal is 4,420 — which suggests a 3 p.c drop from Monday’s shut.