Following a strong 2023 and a brisk start to 2024, many market watchers see stocks taking a breather over the coming 12 months, according to Bankrate’s First-Quarter Market Mavens Survey. These pros see the market moving just 2.2 percent higher in the next four quarters.

These experts predict the Standard & Poor’s 500 index will climb from 5,234.18 at the end of the forecast period to 5,348. It’s the 14th consecutive time that the survey has predicted a gain, though it’s a small one this time out. The group also thinks U.S. stocks are poised to outperform international stocks, while foreseeing that growth stocks will outperform value stocks.

“If investors are concerned that the recent run through record territory might put the S&P 500 in nosebleed territory, the relative confidence expressed by survey participants could be viewed as something akin to a source of reassurance,” says Mark Hamrick, Bankrate’s senior economic analyst.

“Collectively, the outlook is for more restrained returns over both the next year and the coming half-decade, consistent with a methodical and systematic approach to long-term investing,” says Hamrick of the survey results.

Here are the key points from the Bankrate survey.

Forecasts and analysis:

This article is one in a series discussing the results of Bankrate’s First-Quarter 2024 Market Mavens Survey:

Stocks to edge higher in coming year, say pros

After an outstanding performance in 2023 and a strong move higher in 2024, the stock market may not have much room to run over the next four quarters, say analysts in the Market Mavens survey. The survey’s respondents forecast the index to climb just 2.2 percent. On average, they expect the index to rise to 5,348 – up from 5,234.18 at the end of the survey period on March 22.

“Sources of uncertainty abound for the economy and the investing environment over the coming months and years, with elections ahead in the U.S. and around the world, geopolitical conflict and tension, inflation and monetary policy among those we can identify,” says Hamrick.

Analysts remain ambivalent about five-year outlook for stocks

After the market’s strong run over the last 15 months, the pros surveyed by Bankrate remain ambivalent about how the market will perform over the next half-decade, compared to its historical returns of about 10 percent annually on average.

  • 42 percent said returns over the next five years will be lower than long-term returns.
  • 42 percent of respondents said returns will be about the same as their historical average.
  • 17 percent said returns will be above the historical average.

Compare those figures with the results of the prior four Market Mavens surveys, as shown below. Analysts offered rationales for their decisions.

“Margins remain strong and that’s expected to continue,” says Dec Mullarkey, managing director, SLC Management, who expects above-average returns. “Labor supply, assisted by immigration, is helping productivity pick up and technology and AI enhancements should help leverage or enhance that more in the coming years.”

In contrast, others think that the S&P 500’s high valuation will lead to lower forward returns.

“Historically high valuations make it more likely that we will experience returns lower than historical average over the coming five years,” says Sameer Samana, senior global market strategist, Wells Fargo Investment Institute.

“One of the best predictors of stock price returns is starting valuations,” says Michael K. Farr, president and CEO, Farr, Miller & Washington. “At nearly 21x forward earnings, the S&P 500 is certainly not cheap. Therefore, we believe it’s reasonable to expect lower-than-average returns over the next five years, especially if interest rates remain elevated.”

U.S. stocks remain better than global stocks, say pros

While U.S. stock are often the preference of the survey’s respondents, they became a huge favorite in this quarter’s results:

  • 83 percent of respondents favor U.S. stocks in the coming year.
  • None prefer international stocks.
  • 17 percent said the returns between the two would be about the same.

In the fourth quarter, only 50 percent of the experts expected U.S. stocks to outperform global equities, while 33 percent expected similar returns and 17 percent preferred global stocks.

The reasons for their preferences varied, but experts routinely cited the strong economy and business fundamentals.

“The U.S. should do better than global markets over the next 12 months given the leadership of U.S. companies in driving AI development, pro-growth policies that will be espoused by presidential candidates and a central bank ready to cut rates if needed to promote a better growth environment,” says Patrick J. O’Hare, chief market analyst,

“Our economy is the strongest in the world and looks like it should remain so,” says Kim Forrest, chief investment officer/founder, Bokeh Capital Partners.

Mullarkey pointed to a variety of reasons to expect U.S. stock to outperform, including: “The U.S. technology edge is hard to match anywhere else. As inflation cools and rates come down the U.S. is well positioned for growth.”

Meanwhile, others pointed to history in their belief that U.S. stocks would best their global peers.

“Election years, greeted by a positive S&P 500 return in January, saw a full-year price rise averaging 15.6 percent with a full-year price gain 100 percent of the time,” says Sam Stovall, chief investment strategist, CFRA Research.

Pros tap growth stocks to beat value stocks

With the U.S. economy looking surprisingly resilient, many experts remain convinced that growth stocks are the preferred investment over value stocks over the coming year.

  • 33 percent of respondents prefer value stocks to growth stocks over the next year.
  • 50 percent favor growth stocks to outperform value.
  • 17 percent think returns will be about the same.?

The percentage of respondents favoring growth stocks remained the same from the fourth quarter, but the percentage favoring value stock also edged higher.

“With rates anticipated to be flat to down and with economic growth expected to be modest going forward, we think growth stocks with their end market opportunities that have secular growth profiles should lead to growth stocks continuing to outperform,” says Brad McMillan, chief investment officer, Commonwealth Financial Network.

“Value stocks win when they are in a growth phase,” says Forrest, who tapped growth. “We don’t see the value names outperforming traditional growth stocks yet.”

Others preferred value stocks due to the relatively better valuations.

“Some very large growth stocks are overvalued or so highly valued, they ought to underperform as a class,” says Charles Lieberman, chief investment officer, Advisors Capital Management.

“Growth stocks have been the clear leader of the market, but if the U.S. economy continues to avoid a recession, value stocks would seemingly hold the best return prospects over the next 12 months as investors weigh their earnings growth potential with their lower valuations,” says O’Hare.

  • Bankrate’s first-quarter 2024 survey of stock market professionals was conducted March 13-22 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Dec Mullarkey, managing director, SLC Management; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Hugh Johnson, chief economist, Hugh Johnson Economics; Patrick J. O’Hare, chief market analyst,; Charles Lieberman, chief investment officer, Advisors Capital Management; Brad McMillan, chief investment officer, Commonwealth Financial Network; Michael K. Farr, president and CEO, Farr, Miller & Washington; Marilyn Cohen, CEO, Envision Capital Management; Sam Stovall, chief investment strategist, CFRA Research; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Kenneth Chavis IV, CFP, senior wealth counselor, Versant Capital Management; Chuck Carlson, CFA, CEO, Horizon Investment Services.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.