Overbought? Despite Exceptional Year, Signs Point to Continued Rally in 2024

investing.com:

Fear sells.

It sells because a Nobel laureate, through behavioral finance, has taught us that humans tend to weigh losses 2.5 times more heavily than gains. Consequently, the fear of a sudden collapse always lingers in an investor's mind.

However, this fear-driven approach can lead to missed opportunities. The true skill lies in effectively managing the emotional impact of periodic market declines and adjusting portfolio risk during volatile periods — something entirely within our control.

As we approach the end of 2023, the stock market, with a few exceptions like China, is poised to close in double digits for both the U.S. (thus affecting global equities) and Europe in general.

With banks consistently raising bullish forecasts for the S&P 500, and the skepticism of small investors who remain wary even after a +15-20% gain, one thing is certain: the markets in 2024 will once again do what they do best—surprise!

Source: The Web

There's one thing we can point out by looking at the image above. Recently, insiders have rushed to buy and this is usually a good sign for markets in the months to come.

Looking at the recent performance of stocks within the S&P 500 overbought does not always lead to immediate declines. The months following substantial surges, like those we saw in November, often see additional rallies.

Source: Carson

Since 2024 is an election year in the US, there will be efforts to avoid recessions or any financial crisis as much as possible.

Inflation, the primary concern for markets over the last two years, appears to be continuing to ease. This might give Central Banks the chance to start thinking about cutting rates sooner rather than later.

In summary, the outlook for 2024 appears promising. However