Dynasty advisors make end of year stock, economy predictions

The sweltering dog days of summer may be upon us, but financial advisors are still focusing on the future to forecast where stocks could finish the year.  

Dynasty Financial Partners recently completed an informal survey of the more than 400 independent advisors that comprise the Dynasty Network to get their thoughts on the direction of stocks, bonds and the economy through the rest of 2024. With average assets under management (AUM) per firm of $1.8 billion and average assets per advisor of approximately $250 million, the Dynasty Network represents some of the highest AUM-per-firm and assets-per-advisor ratios in the industry.

Dynasty shared a few advisor responses from the study with InvestmentNews.

Jonathan Blumenthal and Tim Harder, co-founders of Quotient Wealth Partners, say the most likely positive scenario for stocks is that the Federal Reserve lowers interest rates in response to a weakening, but stable job market, and the Magnificent 7 continues to handle heady expectations. In their view, this would lead to a benign single-digit equity return in the back-half of the year.

The less rosy outcome, in their opinion, is a modest pullback if the Magnificent 7 falter from these elevated expectations. Still, the impact of any negative economic or stock-specific scenarios will be somewhat muted by the offsetting easing activity of the Fed and the potential for rotation of performance to other sectors of the stock market in their view.

As for the economy, the pair say they work with a lot of employees from large corporations and are starting to sense the early drumbeat of layoffs and early-out packages for the first time since COVID.  

Elsewhere, Christopher Lai, co-chief investment officer from Ascent Wealth Partners, remains cautiously optimistic on the market’s potential for the remainder of 2024. With the exception of a minor setback in April, he believes the S&P 500 has demonstrated remarkable resilience in the first half of the year, suggesting continued momentum and the potential for further growth. 

“Companies have continued to report respectable earnings growth despite economic challenges, driven by effective cost management, innovative strategies, and impressive adaptability to evolving market conditions,” said Lai.

Additionally, he feels the growing expectation of a Federal Reserve rate cut in the second half of the year, potentially as early as September, is further bolstering investor confidence.

“Although the global landscape remains complex, current geopolitical risks appear relatively contained, contributing to a sense of stability in the markets,” said Lai. 

Lai also believes the U.S. economy is showing signs of cooling. He sees this deceleration evidenced in two primary leading indicators of US economic growth – the ISM manufacturing and services reports – both of which have recently dipped into contraction territory. 

“The labor market, while not collapsing, is also showing signs of moderation,” said Lai. “Consumer behavior reflects these trends, with lower-income consumers increasingly seeking value and trading down, while others are delaying major purchases due to high financing costs.” 

That said, he sees a potential silver lining in this slowdown as a cooling economy and labor market should help reduce inflation from the persistently low to mid-3 percent range of recent months and toward the Federal Reserve’s 2 percent target. 

“A slowing but not recessionary economy is precisely what the Fed wants,” said Lai. “For now, the U.S. economy seems to be in a goldilocks zone, where growth and inflation are sufficiently subdued to warrant potential rate cuts, yet not so severe as to impact earnings estimates adversely.”

Finally, Mark Perrault, president and managing partner at Intergy Private Wealth, said he expects added volatility in the market due to this being an election year, but not necessarily “downward volatility.” 

“We review earnings and according to Bloomberg’s current estimates are for the S&P 500’s earnings to be up something like 8.8 percent this year, to be followed by a further 13.6 percent increase in 2025. That, along with rising dividends and the potential for 1 or more slight rate cuts leads us to be cautiously optimistic,” said Perrault.

As for the biggest risk facing investors during the year’s remaining months, Perrault says it is “letting your emotions get the best of you during a Presidential cycle.”