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 laborious to get excited. If we have now higher [economic] progress, then the Fed would not do something,” he instructed CNBC’s “Quick Cash” on Monday. “If we have now worse progress, then numbers are going to return down after which the Fed will ultimately 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 will go a little bit bit larger. However I simply do not suppose you’ll be able to go a ton larger,” he mentioned. “Folks have talked about 5,000. I do not see the way you get to that degree.”
In his official 2024 outlook notice, Harvey instructed purchasers to brace for a “dealer’s market” as an alternative of a “buy-and-hold state of affairs.” His early 12 months technique: Begin with a risk-averse stance.
“The VIX [CBOE Volatility Index] is up 13. Each time we have gone into a brand new 12 months with the VIX at 13, we have seen spikes. We have seen the fairness market pull again, and it is simply not a fantastic 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 laborious for me to get to a a lot larger worth goal,” Harvey mentioned.
But, he nonetheless sees alternatives for buyers.
“What we wish to do is we wish to go to the locations which might be oversold. We simply upgraded utilities in the present day. We upgraded well being care,” Harvey famous. “These are areas which have good valuations, first rate fundamentals and most of the people actually aren’t there at this level.”
‘I hate to say that as being head of fairness technique’
Harvey additionally sees Treasurys as an choice.
“For those who have a look at the options, there are issues which might be 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 reasonably good fee of return and never placed on a complete lot of danger,” mentioned Harvey.
His 2023 S&P goal is 4,420 — which means a 3 % drop from Monday’s shut.