2024 could turn into a ‘trader’s market.’ Here’s how this strategist says you can make the most of that.

Read: S&P 500 is moving toward record territory. Here’s what stock-market investors need to know.

There is no better time, though, to start thinking about a game plan for 2024. Our call of the day from Jeffrey Saut, chief investment strategist at Saut Strategy, offers up a few ideas centered on what he thinks might be a “trader’s market” next year.

In a note to clients, Saut commented on Wall Street’s tight range of S&P 500 year-end forecasts for 2024 — between 4,500 and 5,400. At the lower end, Morgan Stanley’s Mike Wilson expects the index to reach 4,500, with an earnings estimate of $229 per share. Using that “lowball” estimate and a 20 times price/earnings [PE] multiple for the index implies a 4,600 year-end target — still 150 points below where the S&P is now, says Saut.

At the upper end, Ed Yardeni has a $250 earnings per share estimate equal to a price target of 5,000. That’s not much upside from current levels, but Yardeni’s own S&P 500 target is 5,400 meaning he clearly expects PE multiple expansion, say Saut.

Personally, Saut thinks trying to guess an S&P 500 range for a coming year is a waste of time. “I think stocks will be higher at this time next year unless there are some extremely negative news events. Given that narrow trading range (if correct) suggests next year could be a ‘traders market’ presenting opportunities to buy on weakness and sell on strength,” he says.

More advice: “If it becomes such a traders market, the strategy of buying large cap, dividend paying, stocks and writing options against them should be a winning strategy,” says Saut.

The analyst himself is fairly optimistic headed into 2024. He expects a recession can be avoided, decent year-over-year earnings growth can be achieved, with PE multiples expanding marginally, and interest rates holding steady or easing off.

Also, he believes consumers will keep spending money as their wages rise and the Fed’s “fabled” soft landing goal for the economy to be met.

Saut says he has been bullish on the S&P 500 since around the 4,100 October low, until his short-term models turned cautious a couple of weeks ago. He points out that the S&P 500 has been staging a so-called “three-legged rally” — shown in the below chart — in recent weeks. During those, the index typically tends to “stall-out for a while, or peak.”

“Since early/mid-December I have used the stock market’s continuing strength to sell some of the stocks in my portfolios that have not rallied with the overall stock market,” Saut said, though he added that it’s best not to get too negative that often “ebullient” last month of the year.

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The markets

U.S. stocks
DJIA

SPX

COMP
are inching up, as Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
push lower. Gold
GC00,
-0.56%
is headed for a fourth-straight winning session, trading atop $2,080/ounce, with oil prices
CL00,
-0.45%
stepping back from December highs.

Read: Crude oil sees first real ‘death cross’ since the pandemic plunge of early 2020

The buzz

The New York Times
NYT,
+0.95%
has filed a copyright-infringement suit against Microsoft
MSFT,
+0.20%
and OpenAI. The media company said its content was used without authorization to create AI products.

NetEase
NTES,
+4.32%
is climbing after rebounding in Hong Kong as investors returned from a holiday to news of a more conciliatory tone on the online gaming industry by a top China regulator. Rival gamer Huya
HUYA,
+3.68%.
is up and Tencent Music Entertainment
TME,
+3.21%,
owned by gamer Tencent Holdings
700,
+0.20%,
which also got a boost in Asia.

Coherus BioSciences
CHRS,
+2.78%
stock is up 34% after the biopharmaceutical got Food and Drug Administration approval for its on-body injector of cancer drug Udenyca.

Fusion Pharmaceuticals shares
FUSN,
-0.41%
are up after analysts at two firms discussed its prospects as a takeover target.

Tesla
TSLA,
-1.86%
plans to launch an updated version of its popular Model Y SUV at its Shanghai plant, reported Bloomberg News.

The U.S. economic data calendar is empty.

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