Stock Market News Today: Stocks Reel with CPI Data, Fed on the Horizon

Stocks face an “uneven and fragmented” 2024

Wall Street widely expects the Federal Reserve to keep interest rates steady when central bankers announce their policy decision later this week.

But that doesn’t mean stocks will continue their rally next year.

Investors expect the Fed to achieve a soft landing and begin cutting interest rates in 2024. While this scenario is still possible, interest rate cuts could also mean a slowdown or weakening of the economy, which would put stocks in a different environment than they currently find themselves in today, writes Greg Marcus, managing director of UBS Private Wealth Management, in a note dated Monday.

Individual stocks will also perform differently next year, “with different winners and losers across sectors,” he said, in an “unequal and fragmented” stock market. Even if the Fed backs off its tightening campaign, interest rates will still remain higher than during the lucrative zero percent interest rate era.

“Investors will be more focused on rewarding companies that show signs of growth and avoiding profitless and speculative companies,” he said, emphasizing that fundamentals will play a larger role than in the more exciting 2010s. In 2024, investors will separate the wheat from the chaff, he said.

“Markets are already at full speed right now, and while the economy has proven resilient to higher interest rates this year, that cannot continue forever,” Marcus said. “Interest rates will fall, but they are expected to continue to rise for longer and not all companies will be able to cope in this environment.”