2023 In Review and 2024 Market Outlook

For most investors, 2023 marked a much-needed comeback when it came to both stock and bond market performance after a brutal 2022.

Bolstered by the combination of a solid economy, better-than-expected corporate earnings, and an apparent end to the Federal Reserve’s interest rate hikes, stocks rallied 25% in 2023. Technology stocks (and growth stocks more broadly) jumped thanks to expectations of multiple Fed rate cuts in 2024, along with the emerging boom in artificial intelligence technologies.

Meanwhile, bond investors breathed sighs of relief after avoiding an unprecedented third straight year of losses.

As 2024 gets underway, what’s the outlook for the stock and bond markets? What stock sectors are most attractive? What should investors do from here? We’ve gathered insights and perspectives from analysts and specialists about market performance, individual stocks, sectors, and mutual funds.

2023′s Stock Market Performance, the Economy and Outlook

Investors went into 2023 worried about inflation and expecting a recession by the second half of the year.

Instead, inflation has cooled and the economy remained solid despite the first-quarter regional banking crisis, which sparked fears of a credit crunch. While the Fed raised interest rates four times over the year, at their December meeting, officials signaled that no additional increases are expected and they will likely lower rates in the coming year.

Heading into 2024, debates are focused on whether the economy will continue to avoid recession, whether inflation will stay on its moderating path, and whether the Fed will cut rates as aggressively as investors currently expect.

Here’s our look at the big market and economic trends from the fourth quarter of 2023 and Morningstar’s market outlook for 2024 and beyond:

Stock and Bond Market 2023 Reviews and 2024 Outlooks

15 Charts On the Surprise ‘Everything Rally’ for 2023

The stock and bond markets turned in an unexpected banner year.

Top-Performing Stocks of 2023

Coinbase, Nvidia, Palantir, and other tech names dominate the list of the year’s best stocks.

The Worst-Performing Stocks of 2023

SolarEdge, Plug Power, Moderna, and Pfizer are among the year’s biggest losing stocks.

4 New Rules for Investors In 2024

Bonds are really back, cash isn’t king, and two more portfolio strategies to consider.

The Risks Ahead for 2024 and How Investors Can Manage Them

Today’s risks feel elevated, so what really matters?

The 4 Biggest Market Stories of 2023 — and What’s Next in 2024

This year was all about the Fed and what turned out to be an “everything rally.”

Where Stocks Look Cheap or Expensive

While the overall market is near fair value, there are pockets of opportunity.

Q4 2023 Stock Performance and Sector Outlooks

What stocks have done best in 2023? Which have taken the biggest beatings? Which sectors and stocks should long-term investors now be looking at?

Here we take a deeper dive into how various sectors and individual stocks performed in 2023, along with the outlook for the first quarter and top stock picks from Morningstar’s analysts:

Top Stock Picks for 2024

33 Undervalued Stocks

Morningstar’s top underpriced analyst picks of the quarter.

Technology Sector Outlook: A Top Performer With Limited Buying Opportunities

We believe the best tech stocks include Snowflake, Cognizant, and Teradyne.

Communication Services: Surge In Digital Advertising Impressive, but Expect Moderation In 2024

Our favored stocks here include Verizon, Disney, and Comcast.

Energy: Stocks Are Weaker In Wake of Israel-Hamas War Amid Oil Demand Concerns

We currently like the prospects for ExxonMobil, APA, and Equitrans Midstream.

Industrials: Sector Is Fairly Valued, but We Still See Compelling Investment Opportunities

In this sector, we recommend CNH Industrial, Allegion, and RTX Corp.

Financial Services: After Recent Gains, Pockets of Undervalued Companies Remain

We recommend Charles Schwab, Wells Fargo, and PayPal in this space.

Real Estate: Sector Underperforms Over the Past 12 Months but Outperforms In the Quarter

Our favored real estate stocks include Realty Income, Ventas, and Federal Realty Investment Trust.

Basic Materials: As Sector Underperforms, We See Strong Opportunities

In this sector, we recommend Albemarle, FMC, and Newmont.

Consumer Cyclicals: Discounts Retain Their Allure

In this sector, we recommend VF, Hanesbrands, and Hasbro.

Consumer Defensives: Moaty Operators Well-Positioned to Navigate Competitive Landscape

Within consumer defensive stocks, we highlight Tyson Foods, Estee Lauder, and Kellogg.

Healthcare: Valuations Look Attractive Across Almost All Industries

We think the best healthcare stocks include Illumina, Moderna, and Zimmer Biomet.

Utilities: Will the Sector Reset or Repeat In 2024?

Our top picks in this sector are NiSource, Entergy, and WEC Energy Group.

2023 Mutual Fund Performance and Top Picks for 2024

For mutual fund investors, the main story in 2023 was the reversal of fortunes seen by stock funds from 2022. Funds focused on growth stocks left other strategies in the dust, bouncing back from the prior year’s massive losses. Meanwhile, value funds lagged.

For the most part, bond funds avoided an unprecedented third straight year of losses, thanks to the fourth quarter’s big rally and drop in bond yields.

Here’s Morningstar’s take on 2023′s stock and bond fund performance, along with other key trends:

Mutual Fund Performance and Picks

How Bond Funds Fared in 2023

Credit strategies prevail in another volatile year for bonds.

Active Equity Funds’ Triumphs and Trials of 2023

We take a look back at their successes and struggles.

Contrarian Fund Picks for 2024

Large outflows may signal decent future returns for several Morningstar Categories.

2023’s Best-Performing U.S. Stock Funds

Fueled by the ‘Magnificent Seven’ stocks, growth funds take the lead.

The Best and Worst New ETFs of 2023

A record year of new ETF launches brought with it the good, the bad, and the ugly.

6 ETF Investing Predictions for 2024

More bond ETFs, fewer passive ETFs, and what else to expect in the new year.

Best Investments for 2024

With 2023 in the record books, how should investors position their portfolios for 2024? Our experts highlight adjustments to portfolios worth considering as the new year gets underway and offer up opportunities among undervalued stocks for long-term investors.

Best Investments

The Best Companies to Own: 2024 Edition

These companies stand out from the competition and can be good choices for long-term investing.

5 Portfolio Lessons From 2023

Consider these key investing takeaways as you adjust your investment portfolio for 2024.

Our Best Investment Ideas for 2024

We see opportunities in both stocks and bonds in the year ahead.

3 Ways to Simplify Your Investment Portfolio for 2024

Easy ways to streamline your portfolio in the new year.

The Best Funds for Rebalancing for 2024

These top-rated ETFs and mutual funds can bring balance to portfolios.

Top 6 Portfolio Moves for 2024

Asset allocation adjustments to consider for the new year.

This article was originally published by a www.morningstar.com . Read the Original article here. .