Benzinga - by Surbhi Jain, .
State Street Global Advisors is looking toward quality U.S. equities to provide gains and outperform in 2024.
As high rates stifle growth and increase volatility, investors would be looking for potential gains with stability.
In a 2024 ETF Market Outlook, Michael W Arone, CFA Chief Investment Strategist at State Street Global Advisors, projects what investors may expect from the markets as we head into 2024.
Also Read: 60/40 Portfolio Bounces Back From 2022 Slump: Is It The Right Investment Strategy For 2024?
2024 Gains May Meet Some Challenges
Looking ahead, investors expect the shift toward earnings growth. The journey to 2024 gains in the U.S. may meet with certain challenges, notes Arone.
Third-quarter (Q3) earnings reports revealed soft demand outlook, with lower top-line growth relative to bottom-line growth. Despite a projected record-high operating margin of 17% in 2024, concerns arise due to the deceleration of GDP growth and interest rates exceeding 4%, posing a challenge to further margin expansion. Moreover, higher interest rates are impacting corporate profits and balance sheets.
Thus, large caps, with longer debt maturities, are better positioned for a slowing economy with rising financing costs.
Read: Worried About Renewed Recession Fears? Here Are A Few Large-Cap Stocks That Could Protect Your Portfolio
Quality Comes At Play
While the valuations of high-quality companies have risen since 2023, they remain below historical peaks. Metrics such as price-to-forward earnings and price-to-cash-flow are still favorable, and profitability, measured by ROE, is near a record high.
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