Wall Street just wrapped up a strong year, leaving investors to wonder what’s the next step they need to take for a successful 2024. The S & P 500 rose 24% in 2023, ending the year just shy of a record closing high. The Nasdaq Composite outperformed, rallying 43%, its best showing since 2020. The Dow Jones Industrial Average gained 13.7% after reaching an all-time high this year. Strategists at the major Wall Street firms are divided over where the market will go in 2024. The highest S & P 500 target on the Street calls for 8.7% upside from Thursday’s close. The lowest target implies a decline of 12%, according to CNBC Pro’s Market Strategist Survey . There are also concerns over whether a recession will take place. A December survey from the National Association for Business Economics revealed that 76% of economists believe the chances of a recession in the next year is 50% or less. .SPX mountain 2022-12-30 SPX in 2023 Larry Adam, chief investment officer at Raymond James, also said his base case for 2024 is for a “mild recession.” However, Former Dallas Federal Reserve President Robert Kaplan told CNBC on Dec. 26 that there’s a “good possibility” the U.S. avoids a recession altogether in 2024, while Bank of America said recently that the Fed could successfully pull off a soft landing . Against this backdrop, CNBC Pro asked three strategists and money managers how they would allocate $50,000 going into the new year. Here’s what they said. Buy into semiconductor and medical equipment makers Steven Wieting thinks that a myriad of opportunities await investors next year as the rally seen in 2023 broadens out. In other words, investors who may feel that they missed the boat in October have no reason to worry. “What we expect in the coming year is that equities will be rewarding. It’s much more likely to be a smaller gain, but much broader participation,” the chief investment strategist at Citi Global Wealth told CNBC. “There are a lot more companies that will post double-digit gains in the coming year.” Wieting pointed out that while earnings per share for the “Magnificent 7” — which include Nvidia , Meta Platforms and Microsoft — last year soared 44%, the average earnings per share fell 6% for the remaining 493 companies within the S & P 500 . But with many companies exhibiting bullish signs that point towards a more positive macroeconomic backdrop, Wieting expects profits for these names to improve in the new year. Since large-caps are currently trading at elevated prices, Wieting broadly recommends U.S. small- and mid-cap growth stocks with growing profits. Within the technology sector, the strategist highlighted smaller semiconductor equipment makers as a “strong catch-up trade.” While governments have provided strong incentives to build new chipmaking facilities, Wieting emphasized that equipment maker stocks have not rallied nearly as much as the chip designers. A fund with exposure to small and midcap semiconductor stocks is the SPDR S & P Semiconductor ETF (XSD) . The fund rose 35% last year and has an expense ratio of 0.35%. The strategist also thinks that equipment makers within the health care industry could see their fortunes reverse in 2024. “It’s another area where there’s been incredibly narrow performance, led by a couple of drug makers that are treating diabetes and helping people with weight loss, but literally a duopoly in that area,” he said. Exposure to this space can be obtained through the SPDR S & P Health Care Equipment ETF (XHE) . The fund fell 6% in 2023 and has an expense ratio of 0.35%. Invest according to your personal characteristics FBB Capital Partners director of research Mike Bailey offered distinct approaches for different tiers of investors depending on their net worth, time horizon and risk tolerance. For investors with a nest egg and lower risk appetite — perhaps approaching retirement age — Bailey thinks it most useful to invest their $50,000 in a basket of corporate bonds. Specifically, Bailey recommended either the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) or the iShares Core U.S. Aggregate Bond ETF (AGG) . The two funds rose 5% and 2.3%, respectively, in 2023. For those with a longer time horizon, can take on more risk and own little-to-no assets, they should buy a fund that tracks the S & P 500, Bailey said. Bailey recommends this strategy over the long run, regardless of any potential near-term macroeconomic headwinds or the equity market’s currently elevated prices. Bailey, who has experience in behavioral finance research, believes that keeping it simple for these kinds of investors is the smart move. By owning 100% large-cap U.S. equities, buyers reap higher returns than bonds while avoiding common behavioral finance fallacies such as buyer’s remorse and focusing illusions, where they become obsessed with a specific stock. They’re also less likely to fall into the trap of fad investing. He also gave recommendations for a middle tier of investors, those with some money invested but have a higher risk tolerance and longer time horizon. For these investors, Bailey likes Berkshire Hathaway , calling it a counter-cyclical sitting on a ton of cash. Berkshire stock gained nearly 16% in 2023. He also recommended UnitedHealth , which has proven its ability to perform in both bull and bear markets, as well as Visa , a tech-adjacent company with high margins and good recurring growth. Shares of the health insurer were fractionally down last year, while the digital payments stock rose 25%. Bailey also likes Eli Lilly , the pharmaceutical company behind the GLP-1 drug Mounjaro. “There are a lot of expectations for growth built in, but they’re also just getting started so I think the stock can keep working,” he remarked. Eli Lilly had a breakout performance in 2023, rallying 59%. REITs are headed for a rebound in 2024 Cresset Capital Management’s chief investment officer, Jack Ablin, agrees with Bailey that for investors with no prior investments and a time horizon of at least seven years, owning a broad basket of stocks like the S & P 500 is a great place to start. “What we find is that if you hold a broad basket of equities for seven years or more, the likelihood of making money is nearly 90%,” he said. In this situation, investors needn’t worry about sector-specific allocation. For an investor with an existing portfolio seeking to outperform the market over the next year or two, Ablin recommends buying into real estate investment trusts with their $50,000. “They’re trading at pretty big discounts,” he noted, adding that REITs were hurt by rising rates in 2022 and essentially traded flat in 2023. “They have some opportunity to catch up, particularly in an environment where we expect short-term interest rates to gradually come down.” Names Ablin recommends for the new year include the Essex Property Trust (ESS) , which specializes in multi-family apartment rentals and has a long history of growing its dividend over time, he said. Federal Realty Trust (FRT) , which invests in neighborhood strip shopping centers, has a similar strong dividend growth history, he said. The two REITs respectively added 17% and 2% in 2023. Finally, Ablin underscored T. Rowe Price Group as a money manager expected to prosper as the market expands in 2024. Shares of the money manager fell 1% last year.
