Utilities, energy seem like favorable for 2024: Strategist

Stocks are celebrating an early Santa Claus rally — and it's not even December yet — as investors feel more at ease buying back into the market as inflation cools and the Federal Reserve is signaling its intentions to cut interest rates in 2023. Now, questions are popping up over whether this rally is sustainable well into 2024.

US Bank Wealth Management Senior Investment Strategist Rob Haworth joins Yahoo Finance to share forecasts on his favored sectors of the market during this rally and what the market may look like in 2024.

"There is certainly some value that's arisen in the market as we take a look into 2024, we've seen utilities, defensive companies, financials, healthcare, a lot of sectors outside of those gross sectors like technology and communication services which have been left behind and may have some catch up to do in 2024," Haworth explains. "But, it's hard in the long-term to discount those growth-oriented companies because this is an economy where fast is getting faster."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

- Rob, I want to pivot a little bit from the economy to equities, and get your take on where things stand now in terms of the market movement, some of this FOMO trade that seems to be happening. What is your view on what's happening? Is it, is it a catch up trade?

ROB HAWORTH: Well, there's certainly been some of that, if we take a look at smaller companies at utilities here lately. As we look at it and we look at the broad S&P 500, we think we're still in what we've termed the chop, right. This is a market that is really looking for direction one way or the other whether it is recession, it is Fed rate cuts on the horizon, or are we past this earnings recession and earnings are really going to be quite strong headed into 2024.

So we're seeing the S&P 500 as bound between, say 4,150 on the low end and 4,600 on the upper end. And until we get out of that range, I think it's a lot of uncertainty and back and forth. There is, I'm sorry, go ahead--

- No, go ahead, Rob.

ROB HAWORTH: Oh, yeah. No, I think as we look at it, there's certainly some value that's arisen in the market as we take a look into 2024. We've seen utilities, defensive companies, financials, healthcare, a lot of sectors outside of those growth sectors like technology and communication services which have been left behind and may have some catch up to do in 2024.

But it's hard in the long term, to really discount those growth oriented companies because this is an economy where fast is getting faster, artificial Intelligence, Cloud computing software, data security are all major factors as we think about spending moving forward over the next two or three years.

- And Rob, you're also a fan of oil here?

ROB HAWORTH: Well, we're, it's something we're really considering as we look ahead. I think the challenge for oil is global demand. We really need global trade to rebound and that soft data coming out of China and Europe is not good news for global trade just yet, nor for global oil demand. But as we get through this winter season, there's a lot of support to think about when it comes to oil. Particularly because, inventories here in the US remain low and, and we're not necessarily positioned to meet that ramping demand, should the economy start to improve.

- And then what are the catalysts that you're looking for to really be off to the races in terms of the economy that changes your perspective on where equities are and where they're headed in 2024?

ROB HAWORTH: Yeah, great question. I think if we can get past this inflationary pressure and get back to a normal economy, that will help. That means we work through, I mean, it's unusual to think about a soft landing without a recession because you don't get that sharp rebound like we saw in 2021 after the 2020 pandemic recession.

But right, we can get an economy that starts to really recover if we get through some of these headwinds and get back to a more normal supply environment. Which means we have enough labor, right, people are certainly seeing higher wages, and that can support better economic activity as we move forward.

- All right. Rob Haworth, great conversation. US Bank Wealth management. We appreciate your time.

ROB HAWORTH: Thank you.