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S&P 500 prediction for the New Year (2024)

Presented by Luca Discacciati, co-funder of Forecaster Terminal, the video provides a comprehensive financial outlook for 2024, focusing on the S&P 500 and other markets like gold and oil.
The webinar offers detailed stock evaluations, the impact of political events, and the significance of seasonality in market predictions, equipping viewers with insights and tools for strategic investment decisions.

See the performance of the S&P 500 Index year by year.

  • Forecaster Terminal Insights: Highlights Apple's overvaluation and introduces advanced valuation methods for S&P 500 analysis.
  • Stock Valuation Findings: Reveals mixed valuations among S&P 500's top stocks, indicating varied investment potential.
  • 2024 Market Outlook: Predicts a bullish S&P 500 trend, driven by shifts from overvalued to undervalued stocks.
  • Election Year Influence: Notes historical trends suggesting market growth in election years, particularly under Republican wins.
  • AI-Driven Stock Picks: Recommends undervalued stocks like PayPal, Johnson & Johnson, and Pfizer, spotlighting their AI advancements.

In the ever-evolving landscape of financial markets, making predictions for the New Year is a tradition as old as the markets themselves. For 2024, a deep dive into the S&P 500's potential movement offers both seasoned investors and novices alike a glimpse into what the future may hold. Utilizing advanced tools like the Forecaster Terminal, this analysis brings a blend of fundamental analysis and innovative technology to the forefront of investment strategy discussions.

The Science of Fair Value Estimation

At the core of predicting the S&P 500's direction lies the meticulous calculation of fair value across its leading stocks. The Forecaster Terminal introduces a refined approach to valuation, encompassing methods like the Discounted Cash Flow, Peter Lynch's method, and Economic Value Added. By aggregating these valuations, an average fair value is derived, offering a nuanced view of market positions—be it overvalued or undervalued. This process, applied to the top 36 stocks of the S&P 500, which cumulatively represent a significant portion of the index, lays the groundwork for a comprehensive market outlook for 2024.

Diving into Data: A Microscopic View

The analysis begins with an examination of the S&P 500's heavyweights—Microsoft, Apple, Amazon, Nvidia, Alphabet, and Meta. These giants alone hint at an overvaluation, with their combined weight suggesting a market leaning towards a 14-15% overvaluation. However, expanding the lens to include the top 18 stocks paints a different picture—one of a market that's fairly valued. This shift in perspective underlines the importance of a detailed analysis, beyond surface-level assessments.
As the examination goes deeper, incorporating all 36 stocks, a revelation comes to light—an undervaluation of 1.45%.

This suggests that the broader market may offer undervalued opportunities, especially among stocks that don't make headlines. By excluding the top-performing stocks and focusing on those ranking lower in the S&P 500's hierarchy, the analysis uncovers a market segment ripe with potential, undervalued by as much as 8.32%.

Seasonality and Presidential Elections: The Wild Cards

An intriguing aspect of the S&P 500's journey through 2024 is the impact of seasonality and the U.S. presidential election. Historical data reveals that election years often bring positive momentum to the market, with specific trends favoring different political outcomes. This cyclical pattern, reminiscent of the predictable changes in weather, suggests that 2024 could see a significant uptick, especially if the election sways in favor of market-friendly policies.

Specifically, the potential re-election of Donald Trump presents a unique scenario. Trump's previous tenure was marked by pro-business policies and significant tax reforms, elements that the market responded to with bullish enthusiasm. The prospect of his return to office could signal a continuation of these market-friendly policies, potentially catalyzing another upward trajectory for the S&P 500.

The intertwining of seasonality with the electoral cycle further enriches this narrative. Historical analysis reveals that election years often see an uplift in market performance, with the S&P 500 exhibiting above-average gains. This pattern suggests an ingrained optimism, possibly stemming from the anticipation of policy shifts and their subsequent economic impact. As 2024 approaches, the convergence of this election-induced optimism with established seasonal trends could amplify the market's cyclical movements, presenting traders and investors with heightened opportunities for capitalizing on these patterns.

Moreover, the analysis of seasonality and its correlation with presidential elections through tools like the Forecaster Terminal enables a granular examination of past election years and their impact on the S&P 500. By dissecting these layers, investors can gauge the potential effects of a Trump victory or another outcome, aligning their strategies with the nuanced interplay of political and seasonal factors.

In essence, the dual forces of seasonality and the presidential election stand as pivotal elements that could shape the financial landscape of 2024. The potential re-election of Donald Trump adds a layer of predictability in terms of policy direction, yet the inherent uncertainty of election outcomes ensures that these market dynamics remain a captivating arena for analysis. As investors navigate these waters, understanding the historical patterns and preparing for the various possible outcomes will be key to making informed decisions in the face of these wild cards.

Commodities in Focus: The Dual Dynamics of Gold and Crude Oil in 2024

The commodities market, with its inherent volatility and susceptibility to external factors, is set to play a crucial role in the financial narrative of 2024, particularly through the lenses of gold and crude oil. These commodities, often seen as barometers of economic sentiment and geopolitical stability, are poised at an interesting juncture, influenced by a confluence of factors that promise to shape their trajectories in the coming year.

Gold, traditionally viewed as a safe haven during times of uncertainty, is expected to witness significant movements in 2024. The analysis, derived from the Commitments of Traders (COT) report, indicates a gradual shift in sentiment among producers, merchants, and processors. This group, typically hedging against future price fluctuations to protect their physical holdings, has shown a slow but steady reduction in short positions. This behavior suggests an anticipation of rising gold prices, possibly driven by inflationary pressures or geopolitical tensions that typically increase the appeal of gold as a protective asset.

Moreover, the scenario is compounded by the potential impact of the U.S. presidential election. A re-election of Donald Trump could introduce policies that foster a climate of economic optimism yet also provoke uncertainty on the global stage. Such a paradoxical situation could bolster gold's status as a hedge, with investors flocking to it in search of stability amidst the potential volatility of stock markets and other investment vehicles.

Crude oil, on the other hand, is subject to a different set of influences, with geopolitical dynamics and global energy policies playing pivotal roles. The COT report reveals a noticeable trend of long positions among commercial players in the crude oil market, signaling an expectation of price increases. This anticipation might be rooted in several factors, including potential supply constraints due to geopolitical tensions in key oil-producing regions or shifts in energy policies under a new U.S. administration.

The interplay between these factors and the outcome of the presidential election could dramatically affect crude oil's price landscape. For instance, Trump's pro-fossil fuel stance during his previous tenure led to deregulation efforts and support for domestic oil production, trends that could re-emerge if he were re-elected. Conversely, a different election outcome might favor renewable energy initiatives, potentially impacting crude oil prices through shifts in policy and investment.

Both gold and crude oil serve as critical inputs in the broader economic machine, influencing everything from inflation rates to consumer confidence. Their movements in 2024 will not only reflect but also affect the economic narratives of the time, making their analysis an essential component of any comprehensive market strategy. The subtle shifts in market sentiment, as captured by the COT report, offer valuable insights into the future behavior of these commodities, presenting informed investors with opportunities to position themselves advantageously in anticipation of these changes.

In summary, the dynamics of gold and crude oil in 2024 encapsulate the complexities of the commodities market, highlighting the interplay between economic policies, geopolitical tensions, and market sentiment. As investors and analysts look to the horizon, understanding the nuanced signals from these commodities will be key to navigating the uncertainties of the coming year, leveraging their potential as both indicators and drivers of global economic health.

Looking Ahead: 2024 and Beyond

As the analysis wraps up, the forecast for the S&P 500 in 2024 is cautiously optimistic, with an eye towards undervalued opportunities and the potential impact of external factors like the presidential election. For investors, the message is clear: leveraging sophisticated tools like the Forecaster Terminal can unveil hidden gems and navigate the uncertainties of the New Year with confidence. As we stand on the brink of 2024, the blend of fundamental analysis, technological innovation, and a keen understanding of market dynamics promises a year brimming with opportunities for those ready to dive deep into the data.

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