Morgan Stanley's Investment Chief Offers Stock Market Playbook for 3 Economic Scenarios in 2024

By Jace Dela Cruz

Jan 09, 2024 03:17 AM EST

Morgan Stanley's chief investment officer, Mike Wilson, has offered a stock market playbook for three potential economic scenarios in 2024, providing investors with insights into how to navigate each outcome. 

Markets Open For The First Trading Day Of 2024
(Photo : Spencer Platt/Getty Images)
NEW YORK, NEW YORK - JANUARY 02: Traders work on the floor of the New York Stock Exchange (NYSE) on the first trading day of 2024 on January 02, 2024 in New York City. Stocks were lower in morning trading as investors come of an unexpected strong year in stocks and the American economy overall.

Morgan Stanley's Investment Chief Listed Three Ways the Economy Can Play Out in 2024

According to Business Insider, Wilson believed this year's economy could experience a soft landing with weak growth, a soft landing with rising growth, or a recession.

In the first scenario of a soft landing with weak growth, he recommends studying individual stocks rather than focusing on broader market trends. Cyclicals and defensive sectors like utilities would likely perform better in this scenario, as well as less volatile stocks like large caps.

The second possible outcome is a soft landing with a reacceleration in the economy, considered the bull case, according to Wilson, who suggests this scenario gained probability after the Federal Reserve meeting last December. 

In this scenario, small caps have the potential to shine, as well as cyclicals and economically sensitive industries, such as restaurants and leisure also doing well.

READ ALSO: Dow Jones Hits an All-Time High After Federal Reserve Signals Interest Rate Cuts Next Year 

Morgan Stanley Also Predicts a Recession

On a less optimistic note, a recession is looming, with economists putting the odds at 30% over the next 12 months, according to Wilson.

Defensive stocks like healthcare and utilities typically perform well when the economy plunges. Large-cap stocks, which are more stable, also perform better than small caps in this scenario.

Morgan Stanley is among the less bullish voices on Wall Street and more cautious in its forecast, projecting the S&P 500 ending this year at 4,500, while others have called for a rise above 5,000.

Despite different opinions, Morgan Stanley's investment chief has offered strategic insights on navigating the stock market amid economic uncertainty this year.

READ MORE: Federal Reserve Poised to Cut Interest Rates 6 Times in 2024 as US Economy Slows Down: ING

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