This year’s broader market rally isn’t over just yet, according to Citi. “We look for further S & P 500 upside in the year ahead. However, investors need to be prepared for changing conditions as 2024 unfolds,” market strategist Scott Chronert wrote in a Friday note. “Following the strong Q4 2023 rally, pullbacks should be expected, and bought into, as a shifting Fed narrative unfolds.” Citi set a year-end target of 5,100 for the S & P 500, dependent on a $245 earnings per share estimate for the index. Looking ahead, however, the firm lowered its mid-2024 target to 4,800 to allow for economic softening for the first half of next year. “On our full-year scenarios, the market is pricing in a higher probability of our bear case than bull,” Chronert said. According to the strategist, some “near-term restraint” is required amid strong fourth-quarter gains this year and lingering macroeconomic complications. “A constructive micro backdrop should put a higher floor under equity markets, meaning pullbacks should be bought,” he said. Diversifying beyond 2023’s megacap growth leadership is a key theme headed into next year, according to the firm, which advocated for gradually rotating away from megacap growth names as more sectors and individual stocks contribute to the year-end rally. Moving forward, Chronert advised holding growth stocks and adding to cyclicals, select defensive names and more fundamentally leveraged small- and mid-cap companies to play the broadening of the S & P 500 rally this year. Growth looks expensive compared to the sector’s history and could face some multiple compression, he said. This year, outsized gains from the “Magnificent 7” group of tech stocks — which comprise nearly 30% of the S & P 500 and include names such as Apple , Nvidia , Alphabet and Microsoft — have dominated the broader market. The Bloomberg Magnificent 7 Price Return Index shows the basket has jumped about 97% this year. The S & P 500 , meanwhile, is up nearly 20% in…
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