The Compound: Three Reasons Stocks Could Have a Good Year in 2024
Markets are trending higher. The S&P 500 Index has started hitting new all-time highs, finally joining the Nasdaq. The Dow hit 38,000 for the first time this week.
After spending a few weeks near these prices, the move higher suggests a further rise ahead. That could bode well for the year as a whole, since January tends to reflect the next 11 months. A few other factors point to strong returns for stocks here.
One factor is improving economic conditions. Inflation has come down significantly. It’s not quite at the Federal Reserve’s target level of 2 percent. But it’s enough that the central bank is done raising interest rates. And the bank hasn’t raised rates since July.
Next, corporate profitability looks reasonable. Earnings season has shown few surprises. The banks have been a bit weaker than expected, but they’re still dealing with higher interest rates.
Investors can still get great returns with companies that offer reasonable growth and have a strong brand. That includes companies like credit card provider Visa (V), and insurer Progressive (PGR).
These are financial companies that can increase their earnings without being as directly subjected to changes in interest rates like a bank.
While last year was an above-average one for the market, conditions are in place for markets to continue to trend higher.