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Forecasters remain divided on their views on the U.S. economy this year. Although some argue that the economy is not yet out of the way and that a recession is possible, there is confidence that the economy is on the mend as the Federal Reserve prepares to cut interest rates. Some people are.
But Stephen Wieting, chief investment strategist and chief economist at Citi Global Wealth, said it would take something big to push the economy down, including new shocks and a deliberate stance on monetary policy. Says.
Inflation was certainly severe and very troublesome for markets, but ultimately the cause was temporary, Wieting said. Unlike in the 1970s, when import prices rose 14% annually and money increased 10%, this time the inflation factor was short-lived.
Price fluctuations in various sectors were caused by temporary imbalances in supply and demand. Lockdowns have displaced different demographics, the housing market has struggled, and closures have caused supply chain shocks, all of which are returning to normal. Therefore, inflation may fall without a corresponding rise in unemployment.
This means that inflation should not be used as a leading indicator. In fact, he said, inflation could surprise us because there is a one-year lag in the consumer price index in some parts of the economy. For example, rents for new tenants are -4% year-on-year through the end of 2023, but the consumer price index for shelters is up 6% year-on-year. Therefore, core CPI will largely decline throughout the year, he added.
investment opportunity
At the top of his list for future growth, he says, is the copper sector. He said it is the energy material of the future, with demand expected to increase, and there is no substitute for it. Copper is expected to benefit as other energy-based companies and products transition to clean energy.
According to Citi Global Wealth’s 2024 Outlook, demand for copper will triple by 2030 due to the transition to clean energy and electric vehicles. Investors can seek opportunities in copper mining companies.
City Bank Asset Outlook 2024
He expects the Magnificent Seven to continue to perform well in the stock market. Last year was a great year for the S&P 500, with the arrival of seven mega-cap tech stocks. 111% backraise the index twenty four%. But unlike other fund managers who believe people are getting too rich right now, Wieting said the share price rise is justified by earnings per share, which rose 44% in the fourth quarter. and said it could be even higher once all profits are reported. By comparison, EPS has been below 10% for at least half of the past decade, he said.
He believes the Magnificent Seven will again be a strong part of the economy heading into 2024. However, he pointed out that there is variation among them and their futures are based more on their own fundamentals than on group performance.
Outside of technology, most industries saw EPS declines last year, but that trend will reverse this year, he said. Therefore, investors should look for growth opportunities in mid-cap stocks or within the S&P 400, the U.S. mid-cap benchmark. Opportunities also exist in the S&P 600, the U.S. small-cap benchmark.
In addition, investors can focus on companies that provide chip manufacturing equipment that are well-positioned to be beneficiaries of artificial intelligence spending and government subsidies for Magnitude 7, he added. They are lagging behind big chipmakers, he noted.
Other opportunity sectors include medical technology companies, which are likely to make gains this year as health services recover from pandemic-era stagnation.
Finally, investors can look to industrial materials and capital goods for factories, such as parts manufacturers for the auto industry and manufacturing equipment for consumer manufacturers.
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