November was the best-performing month of 2023 for both the S&P 500 and the Dow Jones Industrial Average. While stocks have performed strongly over the past month, recession concerns have not dissipated from the minds of researchers and analysts. If these concerns come to fruition, stocks may see significant downward movement in 2024.
Analysts and Wall Street are still preparing for a potential recession.
According to a November 24, 2023, report from MarketWatch, a growing number of Wall Street economists believe the economy will experience a downturn in 2024. MarketWatch also reported that Eugenio Aleman, chief economist of investment bank Raymond James, predicts a recession in 2024, saying, “The only uncertainty is whether it’s going to be a mild recession or a deeper recession. That is the only unknown today.”
JPMorgan Chase CEO Jamie Dimon has also publicly cautioned consumers to prepare for a recession and not to underestimate economic risk. Speaking at The New York Times’s DealBook Summit on November 29, 2023, Dimon stated, “A lot of things out there are dangerous and inflationary. Be prepared. Interest rates may go up, and that might lead to recession.”
According to one research firm, a recession could cause stocks to fall as much as 27%.
In an outlook report published on November 27, 2023, strategists from macro-research firm BCA Research predict that the S&P 500 could sink as much as 27% in a 2024 recession, writing, “A recession in the U.S. and euro area was delayed this year but not avoided. Developed markets (DM) remain on a recessionary path unless monetary policy eases very significantly. As such, the risk/reward balance is quite unfavorable for stocks.”
Strategists from JPMorgan Chase also predict a notable, but less severe, drop in the S&P 500 by the end of 2024. In late November 2023, Dubravko Lakos-Bujas, the bank’s chief global equity strategist, wrote, “We expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed. Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated.”
Portfolio holders may wish to diversify their assets for protection.
In times of economic turmoil, Americans often seek safe-haven assets to help protect their wealth. One asset that has long been recommended as a safe haven is physical gold. As an analyst at Goldman Sachs wrote in a note published on November 26, 2023, “Energy and gold can…be an effective hedge against negative supply shocks, from geopolitical or other developments, in scenarios where other assets (especially risk assets) suffer from lower growth.”
Physical gold may serve as a financial hedge for consumers wishing to prepare their portfolios for volatility in the coming year.