US is ‘leading the way’ into 2024, BofA says

investmentnews.com:

Growth, innovation, enthusiasm and uncertainty were some of the key takeaways used to describe what the financial markets are likely to look like in the U.S. next year, according to executives speaking at a Bank of America roundtable on Thursday.

Chris Hyzy, chief investment officer at BofA, led the call with some thoughts about market volatility.

“When the economy is going to grow, at nominal basis 4½, real basis, 1½ to 2, and start the year below trend, it’s very difficult to grow corporate earnings three times the level of economic growth, unless you have margin expansion,” Hyzy said.

“The key question is going to be: Was the second quarter of ’23 the trough for earnings, or is there another one coming? That’s all going to be dependent on jobs,” he added. “It’s all going to be dependent on consumer spending and the resiliency of the consumer, which in our case, we believe that the distortions coming out of the pandemic have yet to fully normalize. Excess savings is not completely wiped away yet.”

Marci McGregor, head of portfolio strategy at BofA, said small-cap stocks have the potential to lead of the next cycle and potentially, the next decade. However, she said that there needs to be a little more stabilization on the earnings front.

“For now, the small-cap, that’s one area that would tend to get me more positive,” McGregor said. “Lower and raised rates are going to be really sensitive, especially to short rates as well. Once we start to see those moves there, I think this could tee up an extended outperformance in small cap. I just think we’re a little early.”

McGregor said she thinks next year will be one in which investors can be invested.

“When I think about 2024 on the equity side for long-term growth and on