2024: Make Way for the “Have Nots”

From our perspective, the 2023 equity market was a case of the “haves” and “have nots”. While U.S. stock indices posted strong gains for the year, it was a remarkably narrow rally with a handful of stocks accounting for much of the gains. The so-called Magnificent Seven (Apple, Alphabet, Microsoft, Amazon.com, Meta, Tesla, and NVIDIA) delivered an average return of more than 100% in 2023, compared to a 24% return for the broader S&P 500.

As we enter a new year, we believe economic conditions are returning to more normal levels after the dislocations caused by the global pandemic. To be sure, inflation has cooled, the labor market has proven resilient, and corporate conditions have generally improved. Moreover, market sentiment is improving and investors are turning more optimistic with the Fed signaling an end to its tightening campaign in December. While far from exuberant, market sentiment has shifted toward more risk-on positioning.

Source: Harbor Multi-Asset Solutions Team, December 2023. For more information about Harbor's indicators and models, please see the end of this document. For hypothetical purposes only.

With receding recession risk and expected interest rate cuts, many market segments are poised to benefit from a soft landing, in our view. This sets the stage for the rally to broaden beyond last year’s big winners. We believe the “have nots” will have their time in the sun in 2024 and that the benign economic backdrop is positive for many asset classes.

While last year’s narrow market rally may have caused some portfolios to drift from target allocations, we believe the time is right to revisit client portfolios to ensure that they are diversified enough to benefit from a broadening opportunity set. To learn more about our range of offerings, please visit our website.

Important Information

The views expressed herein may not be reflective of current opinions, are subject to change without prior notice, and should not be considered investment advice or a recommendation to purchase or sell a particular security.

Past performance is no guarantee of future results.

The information shown relates to the past. Past performance is not a guide to the future.

Investing entails risks and there can be no assurance that any investment will achieve profits or avoid incurring losses. Stock markets are volatile and equity values can decline significantly in response to adverse issuer, political, regulatory, market and economic conditions.

Certain forecasts, estimates and returns are based on hypothetical assumptions. It is for informational and hypothetical purposes only. This material does not constitute investment advice and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. The forecasts, estimates and return presented do not represent the results that any particular investor may actually attain. Actual performance results will differ, and may differ substantially, from the hypothetical information provided. There is no guarantee that any of the forecasts and projections will come to pass.

The Market Sentiment Indicator is a proprietary Indicator used by the Multi-Asset Solutions Team to measure the prevailing conditions that we believe explain market sentiment. The input variables are predominantly market price variables that reflect price momentum across various styles and sectors within equities, credit, fixed income and commodities markets. Market Sentiment Indicator Sources: Harbor MAST, Bloomberg. A limiting factor for our modeling approach is if these relationships change, our models may be less accurate in terms of measuring the conditions that drive market sentiment.

The S&P 500 Index is an unmanaged index generally representative of the U.S. market for large capitalization equities. Index listed is unmanaged and does not reflect fees and expenses and is not available for direct investment.

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