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Bob Doll: Stock Prices Suggest Good News Baked In

By Dinah Wisenberg Brin

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U.S. stocks face headwinds in 2024 and appear to have already priced in potential positive events, Bob Doll, chief investment officer at Crossmark Global Investments, suggested Monday.

Stock market jitters so far this year appear to stem from investors’ second thoughts about how many times the Federal Reserve will cut interest rates in 2024, according to Doll.

“It is unlikely that the Fed will cut rates as much as the market expects, six times,” he said in his weekly newsletter.

Fewer Fed cuts could put upward pressure on longer-term interest rates and downward pressure on stocks’ price-to-earnings ratios, he added.

Stocks should face headwinds due to a weakening macroeconomic backdrop, Doll said. Full-year corporate earnings estimates have dropped by nearly $2 in the past two weeks, he said, noting that the firm has predicted that corporate earnings growth will miss the 11% analyst consensus estimate.

“Equities will continue to have macro tailwinds in the near term but valuations indicate lots of good news is already discounted. While earnings should trend higher in the year ahead, upside is constrained by already high profit margins,” Doll wrote.

“The big theme should be the catchup of last year’s laggards, which favors select non-U.S. markets, along with small caps, value stocks and equal-weighted indexes. the big risk to equities is another upleg in bond yields, since valuations are already full.”

Crossmark expects economic growth to slow this year, “perhaps significantly,” although the U.S. economy remains resilient at the moment, Doll noted. Economic data has been mixed, and the political and geopolitical landscape will trigger volatility from time to time, he predicted.

(Image: Chris Nicholls/ALM; Bloomberg)

Dinah Wisenberg Brin

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