DataTrek 2024 Outlook Survey: Full Results

By datatrekresearch in Blog DataTrek 2024 Outlook Survey: Full Results

For today’s report we have the findings of our DataTrek 2024 Outlook Survey. Thanks to everyone who participated! Before we get into the numbers, a few descriptive points:

We had a total of 538 responses. Each of the 11 questions required a single answer. Where appropriate, we randomized possible responses.
The vast majority (97 percent) of survey takers were from the DataTrek community, with the remainder (3 pct) coming from social media outreach.
At a 90 percent confidence interval, the standard error is 3 percentage points. Any spread in the response percentages for two possible answers larger than that amount is therefore statistically significant.
In the review below, we have bolded the answers with the highest percentage of responses. The percent of response figures noted may not equal 100 due to rounding.
Our central purpose for this survey was to give clients a sense of current market expectations. Sometimes the consensus is right, and sometimes it is wrong.

And now, on to the results, listed in the same order as the survey:

#1: Do you expect the US economy to experience a recession in 2024?

No, US GDP will not decline over 2 sequential quarters this year: 59 percent
Yes, but only a modest contraction: 36 pct
Yes, a sharp slowdown: 6 pct

Comment: Very few (6 percent) respondents see a sharp US economic slowdown this year, and this is the highest conviction “call” from our survey. The difference in response percentages between “no recession” and a “modest contraction” is 23 points, well above the survey’s 3-point standard error. All this points to a strong belief in a proverbial soft landing this year, and we agree with that sentiment. It also explains the market’s high valuations at present; confidence in strong corporate earnings is high.

#2: Where do you expect Fed Funds to end the year (5.25 – 5.50 percent currently)?

Above current levels: 1 percent
The same as current levels: 5 pct
25 – 50 basis points below current levels: 33 pct
75 – 100 basis points below current levels: 45 pct
100 – 150 basis points below current levels: 12 pct
More than 150 basis points below current levels: 4 pct

Comment: Most (84 percent) respondents do not believe the FOMC will cut rates by more than 100 basis points in 2024, and this is the most important finding from our survey. Fed Funds Futures currently put 98.5 percent odds on the Fed cutting rates by more than 1.0 percent this year. It is tempting – but wrong – to think current stock prices are predicated on that outcome. Investor sentiment on the topic, as measured by our survey, is entirely consistent with the FOMC’s latest projection for 3 rate cuts of 25 basis points apiece this year.

#3: Where do you think US 10-year Treasury yields will end the year (4.1 percent currently)?

Above 5.0 percent: 1 percent
4.5 – 5.0 percent: 6 pct
4.0 – 4.5 percent: 20 pct
3.5 – 4.0 percent: 46 pct
3.0 – 3.5 percent: 25 pct
Below 3.5 percent: 2 pct

Comment: Almost three quarters (73 percent) of survey takers think 10-year Treasury yields will be lower at year end 2024 than they are today, another high conviction “call” from the DataTrek community. Most of that group only expects a modest decline, maxing out at 0.5 percentage points by year end. This makes sense to us given that real (ex-inflation) interest rates remain sticky at around 1.75 percent and expected inflation is still running at 2.2 percent. Movement in either component of nominal rates will likely be slow this year, absent a large geopolitical shock.

#4: Which asset class/investment do you think will perform the best this year (in dollar terms)?

US large cap stocks: 51 percent
US small cap stocks: 22 pct
Gold: 7 pct
MSCI Emerging Markets: 5 pct
US 10-Year Treasuries: 4 pct
Cash: 3 pct
US High Yield Corporate Bonds: 3 pct
MSCI EAFE (non-US developed economy): 3 pct
US Investment Grade Corporate Bonds: 3 pct

Comment: We offered 9 options for this question, and US large cap/small cap stocks still took 51/22 percent of the votes, totaling 73 percent. Gold, not other financial assets, came in third at 7 percent. This, in a nutshell, is how tilted investor sentiment is to US equities. Only 5 percent of respondents chose Emerging Markets and just 3 pct answered EAFE stocks. While we agree with the wisdom of the crowd here, we do wonder if US stocks have become an overly consensus trade. Non-US stocks can outperform for a quarter or two, after all. We remain bullish on domestic equities for the year as a whole but would not be surprised to see them underperform non-US stocks for a few months a stretch at various points in the year.

#5: Which US large cap sector do you think will perform the best in 2024?

Technology: 48 percent
Health Care: 15 pct
Energy: 8 pct
Financials: 8 pct
Utilities: 4 pct
Real Estate: 4 pct
Industrials: 3 pct
Communication Services: 3 pct
Consumer Staples: 3 pct
Consumer Discretionary: 2 pct
Materials: 1 pct

Comment: Here we had 11 options, and Tech came very close to hitting 50 percent of total votes (48.3 percent, to be precise). Health Care, which had a tough 2023 but is outperforming in 2024, came in a distant second. As with our prior point, we agree that Tech is the mostly likely winning group this year. Still, the sector’s overwhelming popularity sets the bar high for it to overdeliver on both earnings and expectations regarding the commercial impact of Generative Artificial Intelligence.

#6: Which US Big Tech stock do you think will perform the best in 2024?

Nvidia: 28 percent
Microsoft: 25 pct
Alphabet/Google: 20 pct
Amazon: 15 pct
Meta/Facebook: 6 pct
Tesla: 4 pct
Apple: 3 pct

Comment: Speaking of the hype around Gen AI, survey respondents were most bullish on Nvidia and Microsoft for 2024. The two response rates here were within the 3-point standard error reading. Just after them were Alphabet and Amazon, major players in cloud computing, a Tech subsector which should benefit from mass AI adoption. Bringing up the rear were Meta, Tesla, and Apple. These 3 companies clearly need to tell their Gen AI story better and, well, louder.

#7: How do you think the S&P 500 will perform on a total return basis in 2024?

Up more than 20 percent: 1 percent
Up 15 – 20 pct: 9 pct
Up 10 – 15 pct: 31 pct
Up 5 – 10 pct: 38 pct
Up/down 5 pct: 12 pct
Down 5 – 10 pct: 4 pct
Down 10 – 15 pct: 3 pct
Down 15 – 20 pct: 1 pct
Down more than 20 pct: 0 pct

Comment: US large cap bullishness is the order of the day, with 79 percent of respondents expecting the S&P 500 to be up at least 5 percent in 2024. Moreover, only 8 percent expect it to be down 5 percent or more this year. Opinions are a bit split, however, on whether the index will only have an OK year (+5 – 10 percent, 38 pct of respondents) or a solid one (+10 – 15 pct, 31 pct of respondents). Our view leans to the latter camp.

#8: Which candidate do you think will win the 2024 US presidential election?

Donald Trump: 37 percent
Joe Biden: 33 pct
Someone else: 31 pct

Comment: These results roughly mirror the current Real Clear Politics betting odds averages (link below), which at present are running 39 percent for Trump, 30 pct for Biden, and 28 pct for anyone else. Put another way, one can win at least 100 percent on a bet by accurately guessing the winner of the upcoming US general election. There’s a long way to go until Election Day, and the gambling markets are saying a lot can happen between now and then.

#9: What do you expect the balance of power to be in Washington after the 2024 elections?

Republicans control House, Senate, and White House: 18 percent
Democrats control House, Senate, and White House: 7 pct
Neither party controls all 3: 75 pct

Comment: In the aggregate, survey respondents fully expect Washington DC gridlock to continue past 2024, no matter which presidential candidate wins the election. This is usually considered a positive for capital markets since neither side fully sets the country’s legislative and regulatory agenda. Whether this holds true in 2025 and beyond given the country’s manifold challenges, including but not limited to budget deficits, remains to be seen.

#10: What is your greatest stock market-related concern for 2024?

Geopolitical uncertainty: 36 percent
US political uncertainty: 14 pct
High valuations: 12 pct
Federal Reserve monetary policy: 12 pct
Recession: 10 pct
Tech stock concentration: 6 pct
Long term (10+ year) interest rates: 6 pct
Other/Fill in the blank: 4 pct (US budget deficits most often mentioned)

Comment: This was the most surprising result of the survey, in our opinion, with worries over geopolitics (36 pct) easily beating out the combination of US political uncertainty (14 pct) and high valuations or Fed policy uncertainty (12 pct each). While understandable, geopolitical shocks that noticeably hit stock prices for a protracted period are thankfully rare.

#11: When/if “B” ETFs become available, do you plan to invest in them? (Note: “B” is our email spam filter workaround for discussing the largest virtual currency by value, whose name begins with that letter.)

Yes: 17 percent
Maybe: 28 pct
No, I prefer to invest through wallets: 11 pct
No, I have no interest in “B”: 44 pct

Comment: That just 17 percent of respondents were ready to write “Buy” tickets for a “B” ETF may help explain why the underlying asset price hasn’t done much since those products went live last week. The “Maybe” camp probably remembers the hype around the launch of futures trading in December 2017, when “B” hit $18,000 but then did not see that level again until November 2020. As for the “No” camp, which happens to be the largest cohort, we’re not sure anything can convince them to add virtual currencies to their portfolios.

Sources:

Real Clear Politics betting odds: https://www.realclearpolitics.com/elections/betting-odds/2024/president/