Big US Tech Stocks to head higher in 2024

As the year draws to a close big US tech stocks have not only managed to recoup ground lost earlier in the year but are also set to continue their strong performance going into 2024.

Unlike the broader US market, which still carries bruises sustained by the Fed’s rate rise decisions, as equities are starting to recover, US giant tech stocks are closing the year on a high note: Amazon NASDAQ:AMZN is up 71% year-to-date, Alphabet NASDAQ:GOOGL rallied 48%, Meta NASDAQ:META gained a whopping 167%, while Apple NASDAQ:AAPL and Netlix NASDAQ:NFLX are trading up 58% and 61% higher, respectively.

US tech stocks to outperform the wider market

Among several big issues that will mark the performance of the US stock market next year, two stand out: the Fed’s rate decisions and the run up to the presidential election in November. Both issues could cap market recovery in the first half of the year but will pave the way for a stronger second half.

On the first point, the Fed seems to have completed its rate raising cycle but rather than cut rates in the coming months is expected to keep them at the current level – the highest investors have seen in about 20 years.

Interest rates at above 5% are not synonymous with economic growth, instead they are likely to usher in a period of at least six months in which economic conditions are neither declining nor improving. While the markets are taking any decision that doesn’t involve rate raises as good news, it may not be until the last quarter of next year before we see some significant economic growth in the US.

On the second point, the US election in November, the political uncertainty is expected to supress risk appetite and keep volumes of trade lower than usual.

Looking at the leading US indexes, next year the largest tech stocks are still expected to comfortably outperform the rest of the market, according to Goldman Sachs analysis.

The S&P 500 index is expected to rise to 4700 by the end of 2024, representing a price gain of about 5% and a total return of around 6% including dividends. The US economy is expected to grow at a modest 2.1% next year, a rise already reflected in stock prices.

“Our macro forecasts imply a benign outcome for equities, but the current starting point will limit the potential appreciation for the benchmark US equity index in 2024,” said David Kostin, Goldman Sachs Research chief US equity strategist.

Although they may not grow at the same impressive pace as this year, the seven large tech-stocks still have faster than expected sales growth, higher margins, a greater re-investment ratio, and stronger balance sheets than the other 493 stocks in the S&P 500.

Kostin expects the gains in the index to be concentrated in second half of 2024. “Resilient economic growth in the beginning of the year will force the market to push back its current pricing that Fed cuts will begin in the second quarter,” Kostin writes. “US election uncertainty will suppress risk appetite. Later in the year, the first Fed cut and resolution of election uncertainty will lift US equity prices.”

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