Markets Rally on Fed Policy Shift; Mega-Tech Stocks and Banks Poised for Gains in 2024
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The market rallied in 2023 after the Fed shifted to a more accommodative policy stance, signaling interest rate cuts in 2024. Key stories were some bank failures early in the year, the rise of AI and mega-cap tech stocks, and volatility around rising then falling interest rates.
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Heading into 2024, most of the "Magnificent Seven" mega-cap tech stocks that drove markets in 2023 now look fairly valued, except for Alphabet which remains undervalued.
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Regional banks sold off on funding cost and deposit loss pressures, but names like US Bancorp and KeyCorp still look undervalued, with upside as pressures ease.
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With interest rates expected to keep falling in 2024, rate-sensitive sectors like utilities (NiSource) and real estate (Realty Income) offer dividend yields above 5% and upside as rates decline.
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Dave will share his 2024 outlook in January, but given valuations, expects another positive year driven by mega-caps, banks, and rate-sensitives as the Fed keeps rates low.