The substantial gains in the U.S. stock market in 2023, with the S&P 500 marking a 24% annual increase, may bode well for equities in the coming year, according to market strategists. Historical data suggests that strong annual performances often extend into the following year, attributed to momentum and solid fundamentals. LPL Research data from 1950 reveals that years following a 20% or more gain in the S&P 500 tend to see an average rise of 10%, with a higher likelihood of positive outcomes. Analysts project a favorable outlook for 2024, with expectations of continued momentum, a target range for the S&P 500, and positive indicators such as a record high and historical patterns in election years. However, the market's strength will face tests, including upcoming corporate earnings reports and signals from the Federal Reserve's monetary policy meeting. While historical trends provide guidance, analysts acknowledge the need for flexibility in assessing the market's trajectory. Jared Bernstein, a key supporter of President Biden's economic agenda, stated that the strains on US consumer spending, like increasing credit card delinquency rates, indicate a return to pre-pandemic debt levels, reported Bloomberg. Despite a rise in consumer debt, Bernstein highlighted wealth gains, job market strength, and increased real wages in 2023 as signs of progress from the inflation surge affecting Biden's approval ratings. While credit card balances grew, Bernstein noted that it reflects a return to normal levels rather than a ballooning issue. He emphasized that Americans are in good shape regarding debt servicing, with a 3.7% rise in disposable income supporting consumer spending. Looking ahead, the White House aims to focus on lowering costs, building on progress made in areas like healthcare and reducing fees.
The interest rate on the most prevalent type of U.S. home loan has experienced a notable downtrend, marking its ninth consecutive weekly decline and reaching the lowest level since May, as indicated by data released by Freddie Mac on December 28. Specifically, the 30-year fixed-rate mortgage averaged 6.61%, showing a decline from the previous week's rate of 6.67%, reported Reuters. This sustained drop in interest rates comes on the heels of a peak in late October, when rates hit their highest level in 22 years. Over this period, rates have plummeted by a substantial 1.18 percentage points. This trend reversal is noteworthy, especially considering the trajectory of mortgage rates during 2022. Amidst the Federal Reserve's robust campaign to curb inflation, mortgage rates surged after having dipped below 3% during the peak of the COVID-19 pandemic. However, the recent signaling by the Federal Reserve that it has concluded its rate-hiking strategy and is likely to initiate rate reductions in 2024 has spurred a significant shift. This change in sentiment has triggered a year-end rally in bond markets, influencing the yields on the 10-year Treasury note—a crucial factor in determining mortgage rates. Notably, these yields have decreased to below 4%, a marked contrast from the levels around 5% observed in late October. The bond market's reaction to the Federal Reserve's stance has contributed to the favorable environment for homeowners, potentially signaling a period of more affordable borrowing costs in the housing market. On the stock market front, analysts are bullish on retail giant Costco Wholesale Corporation (NASDAQ:COST) and a significant player in the online travel and restaurant reservation industry Tripadvisor, Inc. (NASDAQ:TRIP) among many others. Check out the complete article to see the details of these upward revisions in price targets. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we also pay very close attention to this often-ignored indicator at Insider Monkey.
Best Slow Growth Stocks To Buy According To Hedge Funds
On December 29, Goldman Sachs increased its price target on Equifax Inc. (NYSE:EFX), a company operating in the credit reporting industry, from $195 to $222. Despite the target boost, the investment firm maintained a Neutral rating on the shares. The analyst justified the price adjustment by pointing to the appreciation in the peer group multiples. Goldman Sachs highlighted that Equifax Inc. (NYSE:EFX) is facing notable headwinds in the mortgage sector, which outweigh the positive impact of new revenue contributions from the recently concluded Boa Vista acquisition in Brazil. This led to a revision of the company's 2023 guidance following the release of its Q3 results.
TimesSquare Capital U.S. Mid Cap Growth Strategy made the following comment about Equifax Inc. (NYSE:EFX) in its Q3 2023 investor letter:
“In the Industrials sector we gravitate towards business service companies, those focused on automation & efficiency improvements, and essential infrastructure services. Equifax Inc. (NYSE:EFX) is a credit bureau offering data analytics and information services. Its stock lost -22% due to second quarter revenues falling short of estimates and lower 2023 guidance. Lowered expectations were almost entirely attributable to a worse outlook for second-half mortgage origination volumes.”
On December 29, Goldman Sachs analyst George Tong increased the price target on TransUnion (NYSE:TRU), a company in the credit reporting industry, from $63 to $72 while maintaining a Neutral rating on the shares. The decision to raise the target was attributed to the appreciation in peer group multiples. Despite the optimistic adjustment, Goldman Sachs expressed concerns about TransUnion (NYSE:TRU) revenue performance in the near term. The analyst emphasized the company's "unique" revenue mix and highlighted potential challenges stemming from weakening credit conditions among subprime consumers. Additionally, the firm anticipates high decremental margins, contributing to the Neutral rating. Investors should be mindful of the evolving dynamics in TransUnion (NYSE:TRU) market and recognize the potential upside of 5% suggested by the increased price target. Goldman Sachs' analysis reflects a balanced view, acknowledging positive factors while cautioning against challenges that might impact the company's revenue trajectory in the short term.
TimesSquare Capital made the following comment about TransUnion (NYSE:TRU) in its Q3 2022 investor letter:
“TransUnion (NYSE:TRU) is a credit bureau providing risk and information services. Share price weakness of -25% stems from weaker-than-expected results and a reduction in forward guidance; some of which is attributable to lower mortgage volumes. We have been reducing this position for most of 2022, and plan to exit completely.”
On December 29, Citi analyst Benjamin Gerlinger adjusted the price target for Cadence Bank (NYSE:CADE), a company in the banking industry, raising it from $27 to $32. Despite the upward revision, Citi maintained a Neutral rating on the shares. The rationale behind the target adjustment was linked to several non-core items in Cadence Bank (NYSE:CADE) Q4, including the completed insurance divestiture, securities restructuring, wholesale borrowing paydown, special assessment charge, and the inclusion of 1 million shares of repurchases per quarter in 2024. Investors should note the potential upside of 8% indicated by the increased price target. Citi's analysis acknowledges the positive steps taken by Cadence Bank (NYSE:CADE) in addressing non-core items and implementing strategic changes. However, the Neutral rating suggests a balanced perspective, considering various factors that could influence the bank's performance.
Furthermore, Citi closed its "positive catalyst watch" on Cadence, stating that recent share price movements have already reflected any potential upside resulting from the positive reconfiguration of the core franchise. This decision implies that the positive developments within the core franchise have already been factored into the current stock valuation. Investors may want to carefully assess Citi's insights as they navigate investment decisions related to Cadence Bank (NYSE:CADE).
Here is what Bernzott Capital Advisors specifically said about Cadence Bank (NYSE:CADE) in its Q2 2022 investor letter:
“Cadence Bank (NYSE:CADE): Its merger of equals with BancorpSouth combines two long-standing franchises forming the sixth largest bank in its nine-state footprint in the attractive southeast market. The merger should offer revenue and cost synergies as the integration is executed over the coming quarters. This asset sensitive bank generates approximately one-third of revenues from feebased businesses such as wealth management and trust services which provides diversification and improves durability of financial results. The stock trades at a discount to peers and sports a 3.5% dividend yield.”
On December 29, Ascendiant, an investment firm, increased the price target for Booking Holdings Inc. (NASDAQ:BKNG), a major player in the online travel agency industry, from $3,700 to $3,900, maintaining a Buy rating on the shares. The decision to raise the target is grounded in the firm's optimistic long-term outlook for Booking. Ascendiant expressed a positive stance on Booking's prospects, emphasizing that both travel and the travel industry have returned to a state of normalcy and are expected to exhibit robust growth. According to the analyst, Booking Holdings Inc. (NASDAQ:BKNG), being one of the world's largest online travel agencies, is well-positioned to secure a substantial share of the economic opportunities within the travel industry.
Investors should take note of the considerable upside potential of 10%, as indicated by the increased price target. Ascendiant's bullish outlook reflects confidence in Booking's ability to capitalize on the resurgence in travel activities and solidify its position as a key player in the evolving landscape of the travel industry. The analyst's assessment underscores the importance of considering the long-term growth trajectory of Booking Holdings Inc. (NASDAQ:BKNG) as it navigates the post-pandemic travel environment. Investors may find Ascendiant's research note insightful as they assess potential opportunities within the online travel agency sector.
ClearBridge Sustainability Leaders Strategy made the following comment about Booking Holdings Inc. (NASDAQ:BKNG) in its Q3 2023 investor letter:
“Also in the consumer discretionary sector, Booking Holdings Inc. (NASDAQ:BKNG) shares rose as travel and leisure companies continued to fare well, with a strong summer season of travel driving positive sentiment. Booking maintains a strong competitive moat, in terms of direct traffic share and marketing efficiency, and its strength in alternative accommodations. These are growing faster than hotels and reached 34% of lodging room nights during the third quarter, which was notable as Booking has yet to reach full feature parity versus rival Airbnb (ABNB) — suggesting there is some room to grow there.”
On December 29, Ascendiant Capital Markets increased its price target for Expedia Group, Inc. (NASDAQ:EXPE), a significant player in the online travel industry, from $133.00 to $168.00 while maintaining a Buy rating on the shares. This adjustment signifies an upside potential of 11%. Ascendiant Capital Markets' positive outlook on Expedia Group, Inc. (NASDAQ:EXPE) is indicative of their confidence in the company's future performance. The increased target suggests that Ascendiant sees further growth opportunities for Expedia Group, Inc. (NASDAQ:EXPE) within the online travel sector. Investors should consider the substantial upside potential of 11% communicated by the revised price target. Ascendiant's Buy rating underscores their belief in Expedia Group's ability to capitalize on evolving trends in the travel industry and navigate the challenges posed by the changing landscape. As the travel industry undergoes transformations, Expedia Group, Inc. (NASDAQ:EXPE) appears poised to capture significant value, according to Ascendiant Capital Markets.
Patient Capital Management made the following comment about Expedia Group, Inc. (NASDAQ:EXPE) in its Q3 2023 investor letter:
“At Expedia Group, Inc. (NASDAQ:EXPE), we believe the market is underappreciating the company’s transformation. Over the past few years, the company has prioritized its top three brands (expedia.com, hotels.com, vrbo.com), successfully implemented a single technology stack, and officially rolled out OneKey their combined loyalty program, across all brands. With strong free cash flow generation, the company continues to buy back their stock, creating a positive flywheel of shareholder return.”
