How stock markets looked on the final trading day of 2023, what to expect in 2024

"On January of this year, 363 days ago, if I said I think the S&P is going to gain more than 20% in 2023, you would have put me into the slightly nutty category."

This is what Oliver Pursche, senior vice president at Wealthspire Advisors, in New York told Reuters. He added, "There's certainly reason to be pleased this year and there's reason for optimism going into 2024."

For the year, technology, communication services , and consumer discretionary were the outperformers, with utilities, energy and consumer staples losing ground. 

The 'Magnificent 7' lead gains

The S&P 500 closed out 2023 with a gain of more than 24 per cent and the Dow finished near a record high, as easing inflation, a resilient economy and the prospect of lower interest rates buoyed investors, particularly in the last two months of the year.

Stocks closed Friday with modest losses. The S&P 500, the Dow and the Nasdaq have booked nine consecutive weekly gains - the longest weekly winning streak for the S&P 500 since January 2004, and the longest for the Dow and the Nasdaq since early 2019.

The S&P 500 slipped 13.52 points, or 0.3 per cent, to 4,769.83. That is still just 0.6 per cent shy of an all-time high set in January of 2022. The Nasdaq slipped 83.78 points, or 0.6 per cent, to 15,011.35, but that was barely a blemish on an annual gain of more than 43 per cent, its best performance since 2020.

The broader market's gains were driven largely by the so-called Magnificent 7 companies, which include Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla. They accounted for about two-thirds of the gains in the S&P 500 this year, according to S&P Dow Jones Indices.

Nvidia lead the group with a gain of about 239 per cent. Of the 11 major sectors of the S&P 500 real estate posted the largest percentage loss. 

Asian markets

Asian markets had a mixed session on the last trading day of the year for most markets. Tokyo’s Nikkei 225 gave up 0.2 per cent to 33,464.17. It gained 27 per cent in 2023, its best year in a decade as the Japanese central bank inched toward ending its longstanding ultra-lax monetary policy after inflation finally exceeded its target of about 2 per cent.

India's Nifty corrected after rising for five sessions on Friday, but closed the week higher by 1.79 per cent. It closed the month higher by 7.9 per cent and the year higher by 20 per cent, said Deepak Jasani, Head of Retail Research at HDFC Securities. Activity was concentrated in auto, banks and rail stocks, Jasani said.

The Nifty Smallcap 100 Index was still up more than 50 per cent for the year, more than double the benchmark gauge's year-to-date return.

What history predicts for 2024

Analysts suggest that going by history, these trends could mean a stellar 2024 for investors. Market strategists who track historical trends say that such a strong annual performance for stocks has often carried over into the following year, a phenomenon they attribute to factors including momentum and solid fundamentals.

Ryan Detrick, chief market strategist at Carson Group, notes that stocks have seen strong gains after rebounding from steep drawdowns. Since 1950, there have been six times - like this year - when the S&P 500 rebounded by at least 10 per cent after falling 10 per cent or more the previous year. The S&P 500 tumbled over 19 per cent in 2022.

Detrick noted the data as part of a recent commentary on why 2024 "should be a good one for the bulls." Reaching a record high could be another bullish sign for stocks.

Since 1928, there have been 14 instances of a gap of at least one year between S&P 500 all-time highs, according to Ed Clissold, chief U.S. strategist at Ned Davis Research. The S&P 500 went on to rise an average of 14 per cent a year after a new high was reached, rising 13 of 14 times, according to Clissold.

Investor hopes for an economic soft landing will get an early test next Friday, with release of the monthly U.S. employment report.

Indian experts suggested that autos, construction and financials are set to do well in 2024. Autos are in a cyclical rebound, financials are fairly valued even after the recent run up and the prospects for construction related segments continue to look good. Capital goods will continue to do well in 2024 too.

- Inputs from AP, AFP, Reuters, Bloomberg and IANS