Stock market predictions for the rest of 2024 that investors should watch

What’s on your mind, financially speaking, in 2024? Dow Breaks 40,000 or Retreats? Impact of elections on markets? Inflation and interest rates? Artificial intelligence and juggernaut that’s it Nvidia (NVDA)? Retirement? All of the above? You’re not alone in wondering about your financial well-being for the rest of the year. Before you lose any more sleep, know that there are many other events happening this year, and there’s a way to look at them all with peace of mind.

In this article, I draw on the wisdom of financial advisors, as well as the Fed and other institutions, to try to determine how the market might fare for the rest of the year, how to think about investing, and whether the U.S. presidential election and events around the world could impact where you put your money. I’ll also talk about inflation, interest rates, artificial intelligence companies, other sectors, and more.

Stock Market in 2024 So Far

The S&P 500 index is up 15% since the beginning of the year. As of June 21, the Dow Jones Industrial Average was close to crossing 40,000 when it closed at 39,494.67. The Nasdaq is up almost 19% so far this year. The AI ​​sector remains strong, and AI company Nvidia has overtaken it Microsoft (MSFT) one day in June as the world’s largest public company, then dropped to No. 3 Apple (APPLICATION). All of these changes are promising.

“I feel like market sentiment is pretty good right now,” Robin Giles, CFP, founder of Apex Wealth Management in Katy, Texas, told me. “The recession that people said was inevitable for the past few years never happened. Prices are high, but the stock market is also at new highs.”

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Inflation and interest rates in 2024

The US inflation rate was 3.27% at the end of May 2024, which is still too high for the Fed to lower the interest rate, the central bank noted. According to central bank data, the basic interest rate is 8.5%. “Wall Street Journal”. Cash rates table. “The federal funds rate is currently 5.25-5.50%. With this in mind, you can see how the “federal funds plus 3” rule of thumb works: 3 + 5.50 = 8.50,” wrote David Rodeck in “What Is The Prime Rate Today?” on Forbes.com.

Federal Reserve Chairman Jerome Powell said the central bank will cut interest rates when inflation falls to 2%, which could happen this year or next.

“We just saw interest rate cuts in Canada and Europe this week,” Giles told me on June 12. “I believe that we should be getting closer to reducing interest rates here in the US as well,” she added.

She said the stock market had already “priced in” interest rate cuts, so when they do happen the effect may be minimal in some ways, but could ultimately lead to an overall improvement in GDP by encouraging more borrowers who had escaped high interest rates to come back.

Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, believes lowering interest rates will attract more investment to the stock market. “With over $6 trillion in money market funds, you have to think that when interest rates finally come down (Fed rate cuts), some of the money will flow into stocks in search of better returns,” he said.

Nvidia, artificial intelligence and other sectors to watch

Technology is the No. 1 top five sector to watch this year, noted Jason Kirsch, a Forbes technology specialist, CFP in Portland, Oregon.

“Many, including me, see AI as revolutionary and will drive the next wave of growth and innovation in the industry,” he wrote. “Despite potential market volatility and regulatory challenges, the technology industry remains a hotbed of innovation, offering significant opportunities for investors.”

Kirsch cited the remaining four sectors:

• Healthcare, which includes pharmaceutical companies, healthcare providers, medical device manufacturers, and biotechnology companies.
• Industry. This sector includes the production and distribution of goods used in construction, infrastructure production and development, as well as machinery, transport equipment, aerospace, defense and construction products.
• Agriculture. Its main goals include crop production, livestock management, and the supply of raw materials for the production of food and various products.
• Mining. Its extraction of valuable minerals and other geological materials from the Earth is necessary to produce raw materials for various industries, including construction, manufacturing and technology.

The cost of living is rising

The rising cost of living is stressing families and straining their budgets. The May 2024 Consumer Price Index for All Urban Consumers (CPI-U) showed a 3.3% increase in the 12 months ending in May, a smaller increase than the 0.4% increase in the 12 months ending in April. Within that figure, the food index rose 2.1% over the past year.

According to a press release issued by the Bureau of Labor Statistics, which oversees the CPI-U, the breakdown for May 2024 was as follows: “The shelter index not only offset the decline in gasoline prices, but rose 0.4% in May for the fourth consecutive month. The food index rose 0.1% in May. The food away from home index rose 0.4% over the month, while the food at home index was unchanged. The energy index fell 2% over the month, led by a 3.6% decline in the gasoline index.”

Giles said: “Higher prices have hit everyone and. I don’t think things will change much in the next six months. Although she noted recent headlines about food suppliers Target and Aldi cutting prices, these are a “drop in the ocean”.

Tax regulations and changes

“Many, but not all, tax laws include inflation adjustments,” CPA Larry Pon of Pon & Associates in Redwood City, California, told me. These adjustments are important for tax planning for 2025. He added that Congress has delegated domain to the IRS on a wide range of regulations affecting taxpayers, such as tax bracket adjustments, standard deductions, gift and estate exemptions, and IRA contribution and contribution limits for retirement plans.

He recommended that investors and their advisors closely monitor the stock market for tax-saving opportunities through methods such as tax-loss harvesting and doing Roth conversions when certain securities decline. If you do that, he added, “when stocks go up again, you’ll just make tax-free money.”

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American political factors and other geopolitical factors

The results of the U.S. presidential election may have a minimal effect on the stock market in the short term, but they are not usually game-changing. The report, “How Presidential Elections Affect the Stock Market,” published by US Bank, says that the data shows that “market returns are typically more affected by economic and inflationary trends than by election results.”

“Clients often get nervous during election years, and many of them have their own preconceived notions that one party, candidate, or the other will be bad for the stock market,” Brandon Gibson, CFP at Gibson Wealth Management in Dallas, told me. “While volatility in election years is not unusual, the reality is that there is not much difference between the parties when it comes to historical stock market returns and who holds the highest office in the land.”

He added that a client is more likely to “get scared by the hyperbole they read in the press, see on TV or the Internet, and withdraw from the investment altogether,” which is an unwise long-term growth strategy.

Like the presidential election, geopolitical events have typically had little impact on global stock markets. According to JP Morgan Private Bank’s study “How do geopolitical shocks affect markets?”, which reviewed key events such as wars, terrorist attacks, Brexit and the JFK assassination between 1940 and 2022, they could shake up local stock markets. The exception was the “oil shock” of 1973.

“This is mainly because oil shortages have persisted for an extended period, leading to a macroeconomic state of ‘stagflation’ (high inflation with deteriorating productivity growth). In other words, high oil prices in the 1970s essentially prevented the economy from functioning effectively,” the bank’s report reads.

Market sentiment and investor behavior

“Despite a good economy and a strong market, the overall mood is strangely bad. This is the kind of discrepancy between soft and hard data that we have all been wondering about for some time,” Albion’s Ware told me. Ware believes this is partly due to politics and that “the period of bad inflation is fresh” in Americans’ minds. Nevertheless, the market remains stable as investors hold their shares and continue to invest, he added.

Is a stock market crash likely and what other predictions are there?

Financial experts say there will be no stock market crash this calendar year. Expect pullbacks and corrections. Some of that could hinge on election turmoil, a mild recession, weak employment data, a hawkish Fed tone, Ware said. But for each of the factors that are causing the market to crash, there could be solid buying opportunities, so “investors should expect one and be ready to buy one,” he added.

Apex’s Giles believes that once the US has an election and investors have a sense of what the next four years will look like politically, any market volatility will die down and the market will stabilize. “If we keep negative surprises to a minimum, I predict that markets and investor behavior will remain strong for the rest of the year,” she added.

Bottom Line

What does the future hold for investors in the market? No one knows for sure. But most financial advisors who spoke with me believe that solid investment opportunities will continue to arise if you pay attention to the market, its periods of minimal volatility, its ups and downs, and its decline in inflation, possibly followed by a decline in interest rates. despite the controversial presidential election and higher prices for everyday goods. So buckle up, note the ups and downs, and when the time comes, use them to your advantage.

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Brain Trust at Forbes crunched the numbers, conducted research, and analyzed to find the best places to make money in 2024. Download Forbes’ most popular report: 12 stocks to buy now.