Four Stock Investing Insights for 2024

What’s in store for stocks after they climbed a wall of worry to exceed expectations in 2023? Fundamental Equities Global CIO Tony DeSpirito sees a rich hunting ground for stock pickers and offers four insights for 2024 ― from sector likes to international opportunities.

BlackRock’s Tony DeSpirito recently appeared on The Bid podcast with a “Stock Picker’s Guide to 2024.” Some of his key reflections after nearly 30 years as an active investor: “Expect the unexpected” and “stay invested.” 2023 offered a case study in both, with cash-heavy investors forgoing some attractive return in stocks.

Here we offer highlights of the broader conversation with four insights for 2024.

1. Interest rates, inflation and recession remain key topics headed into 2024. What is your view on these?

We’re not macro forecasters in Fundamental Equities. We’re bottom-up stock pickers. We’re looking for good businesses at good prices that we want to own for the next three to five years. That said, it’s important to recognize where we are in the cycle.

I’d say we’re still in the late innings of the economic cycle. That doesn’t mean I’m forecasting a recession or preparing for recession. It just means we’re in the later stages: Employment is rather full, there’s not a lot of slack in the economy, and the Fed’s job is a tough one, to be quite honest. If the Fed tightens too much or for too long, we risk a recession. If the Fed tightens too little or rolls back some of those increases too quickly, we risk inflation coming back. So we’re at that point in the cycle when you have to pull out your late-cycle playbook as an investor.

That means you want to go up the scale in quality, focusing on good businesses with strong balance sheets. (We discuss the appeal of quality and its tendency to outperform after the end of Fed rate hikes in our Q1 market outlook.) And you want to buy at fair valuations. As you do that, the implication for investors is that you’ll be relatively okay no matter what the macro environment offers. I think that was the lesson from 2023.