Forecast: Stock markets will suffer in the first quarter of 2024 according to BofA strategist

Forecast: Stock markets will suffer in the first quarter of 2024 according to BofA strategist

According to a report by finanzmarktwelt.de,

US stock markets enjoyed a massive rally in December that has now stalled. According to a Bloomberg report, Bank of America strategist Michael Hartnett predicts that bonds will continue to rise in early 2024, which could weigh on stock markets. A decline in yields potentially signals sputtering economic growth and could transform the “lower yields = higher stocks” narrative into “lower yields = lower stocks.”

The benchmark 10-year Treasury yield dipped to 4.10% at one point this week as bonds continued their recovery. A further decline toward 3% could mean a “hard landing” for the economy, which would affect market sentiment and stock prices, according to Hartnett. The recovery in US stocks has all but stalled this month after investors recently bet heavily on interest rate cuts from the Federal Reserve.

The labor market data, due today at 2:30 p.m., could provide further clues about the Fed's interest rate outlook. An increase in employment numbers of less than 100,000 could be another signal of a hard landing. Additionally, sentiment indicators identified by BofA show that bull-and-bear signal levels have increased, indicating potential gains in risky assets.

Strategist Michael Hartnett continues to take a bearish stance, while other forecasters such as BofA's Savita Subramanian, as well as experts from Deutsche Bank, RBC Capital Markets and Morgan Stanley, offer different assessments of how equity markets will perform next year.

Given these mixed forecasts and market uncertainty, investor sentiment could remain volatile and continue to weigh on equity markets in the first quarter of 2024. It therefore remains to be seen how the Federal Reserve's interest rate policy and economic indicators will develop in the next few months.