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Raymond James is bracing for a “mild” recession in the new year that will likely result in only “modest positive gains” for equities in 2024. “Benchmark Indexes – Broadly Stay Within Channels That They’ve Been In Since November 2020,” managing director Tavis McCourt wrote in a bullet pointed report on Thursday, referring to stock market averages. “Single Digit Returns A Decent Base Case,” he added. By contrast, the S & P 500 is higher by about 18.4% for the year-to-date through late day trading Thursday, while the Nasdaq Composite is ahead more than 35%. In Raymond James’ base case scenario, or what it believes is the most likely assumption, McCourt said that corporate profit expectations likely need to come down. The investment bank anticipates low-single digit EPS growth for the S & P 500, and “modest” earnings declines for small- and midcap stocks that would not prove as drastic as the fall off in 2023. “The Lesson Is Inflation Coming Down Is A Headwind To Earnings, And Will Be Again In 2024,” McCourt wrote. Against this backdrop, he added, stock picking remains more critical than ever as disparate companies weather differing business cycles. Heading into the new year, Raymond James favors several stock sectors, among them medical devices, financial services and insurance issues. In its base case scenario, real estate, utilities and telecom offer the best risk-reward. — CNBC’s Michael Bloom contributed reporting
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