Analysts: Prepare for Stocks to Outperform Fixed Income in 2024

Strategists believe that there is going to be some major growth in 2024, with stocks leading the charge. But this one area should see the most growth.

| More on:
Arrowings ascending on a chalkboard

Image source: Getty Images.

For the last two years, investors around the world have been told one thing: cash is king. But it looks like that king is about to be dethroned, and stocks will be in favour once more.

The news came down from Barclays’s strategists, and it was a huge headliner. That’s because, for the last two straight quarters, Barclays continued to recommend cash over stocks and bonds. This has included fixed income such as Guaranteed Investment Certificates (GIC).

Now, that’s no longer the case, as stocks look to outperform in the coming year. So, let’s look at what’s changed the mind of this major institution.

What happened?

After the last two quarters saw cash and fixed income do far better, strategists have stated that equities are looking to produce single-digit returns in 2024. This will certainly outperform fixed income, even if those bond yields remain above 5% as they have been.

Other strategists also leaned into this beyond Barclays. They now say that two- to three-year bonds are more ideal as equities recover. It’s now “time to take some risk,” as investors will likely be able to do far better than the 5% on yields.

This comes as rate hikes look to be coming to a close, and an improved economy, along with artificial intelligence, revenue, and earnings, should push stocks higher once more. That’s already been seen, as markets around the world (including the TSX today) had one of the best weeks in quite some time.

Could it hit double digits?

While there are certainly set to be improvements, strategists still believe that hoping for double-digit growth in the markets, even into 2025, is too much to expect. However, downsides have certainly diminished.

But that doesn’t mean there aren’t going to be opportunities for double-digit growth among certain stocks. We’ve already started to see this with megacap tech stocks, but there are still some with room to grow. Instead, it could be a great time to pick up strong discretionary stocks — especially from service-oriented stocks.

With that in mind, here are some discretionary stocks that investors may want to consider, as the market continues to rally into 2024.

Buy at your “discretion”

Some of the top companies to recover among discretionary stocks should see growth, even around the Santa Claus Rally. For instance, companies such as Canadian Tire (TSX:CTC.A) should do well as retail starts to pick up once more. But this also gives you exposure to the automobile sector, which should continue to see growth. This is why Magna International (TSX:MG) should also be a strong option.

Canadian Tire stock fell recently as the company saw sales drop. However, it’s a long-term hold that could certainly provide a benefit for investors. Shares trade at just 15.05 times earnings, with a whopping 4.83% dividend yield. Yet after missing profits and laying off 3% of employees, shares are now quite low. Therefore, it’s primed for a rise during a bull market.

Magna stock is another strong option. Canadians have been struggling to buy a new car in this economy. It’s not just because they can’t afford it; even used vehicles are down thanks to supply-chain disruptions during the pandemic. Now, there could be a surge in new vehicles created, as Magna stock continues to solve supply-chain problems and, indeed, increase its guidance. That’s thanks to more growth in electric vehicle use as well.

Magna stock trades at just 15.79 times earnings, offering a 3.39% dividend yield. But investors aren’t quite on board yet after being burned. So, I would consider this a great stock to pick up as we see a rally into 2024.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

edit Person using calculator next to charts and graphs
Stocks for Beginners

Where to Invest $7,000 in April 2024

Are you wondering how to deploy the $7,000 TFSA contribution increase in 2024? Here are four high-quality stocks for earning…

Read more »

investment research
Stocks for Beginners

New Investors: 5 Top Canadian Stocks for 2024

Here are five Canadian stocks that might be ideal for a beginner investment portfolio.

Read more »

Dots over the earth connecting the world
Tech Stocks

Hot Takeaway: Concentration in 1 Stock Can Be Just Fine

Concentration in one stock can be alright under the right circumstances, and far better than buying a bunch of poor-performing…

Read more »

tech and analysis
Stocks for Beginners

If You Invested $1,000 in WELL Health in 2019, Here is What It’s Worth Now

WELL stock (TSX:WELL) has fallen pretty dramatically from all-time highs, but what if you bought just before the rise? Should…

Read more »

investment research
Dividend Stocks

5 Easy Ways to Make Extra Money in Canada

These easy methods can help Canadians make money in 2024, and keep it growing throughout the years to come.

Read more »

Solar panels and windmills
Top TSX Stocks

1 High-Yield Dividend Stock You Can Buy and Hold Forever

There are some stocks you can buy and hold forever. Here's one top pick that won't disappoint investors anytime soon.

Read more »

clock time
Stocks for Beginners

This ETF Is Up 16% and Could Be the Best Investment Around

Get access to the global market with the click of a button. This ETF is one of the best ways…

Read more »

ETF chart stocks
Stocks for Beginners

3 Best-Performing Equity ETFs in 2024 Thus Far

If you want big winners from big sectors, consider these three ETFs currently surging already in 2024.

Read more »