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Merrill indicated Wednesday that it sits in the soft-landing camp, predicting that 2024 will not experience a deep downturn or market selloff.
“A soft landing is our base case for 2024, meaning growth will likely slow, and the labor market weakens, but we do not expect a deeper downturn that typically corresponds with significant declines in risk-assets,” Merrill stated in a recent investor note.
“While we continue to anticipate a choppy market environment given elevated headline risk, we believe the next couple of months will bring the beginning of a long rotation in equities that includes a move up in areas that have significantly lagged and areas that are well placed for a more substantive rally later next year,” the investment institution added.
In its 2024 outlook report, the financial firm further noted that it believes that the Federal Reserve will most likely begin cutting rates in response to economic weakness, which, in turn, will send shorter-term rates lower at a faster pace than long-term rates. This dynamic will allow the yield curve to begin to normalize.
Merrill also said its portfolio strategy remains balanced while fully invested to start the year.
Looking at Wednesday’s action, the Dow (DJI), S&P 500 (SP500) and the Nasdaq Composite (COMP.IND) were mostly muted as investors wait for the latest Fed rate decision. U.S. Treasury yields (US2Y) (US10Y) on the other hand ticked slightly lower.
