S&P 500 will likely open in the green this morning after the U.S. Bureau of Economic Analysis said the core personal consumption expenditures price index was in line with expectations in December.

Still, Jacob Pedersen, the head of equity research at Sydbank recommends that investors be cautious in 2024. On CNBC’s “Squawk Box Europe”, he said today:

 

I think investors are way too optimistic. Earnings growth expectations of around 10% don’t reflect economies that probably overall on a global scale will grow at a slower rate than 2023.

Versus last year, the said index was up 2.9% in December versus the Dow Jones estimate for a 3.0% increase. S&P 500 is now up nearly 19% versus its low late October.

The market is up 5000% + since 1970

But only 500% when adjusted for inflation

Let that sink in pic.twitter.com/zJ8tH83g1t

Lower rates could be a tailwind for SPX in 2024

On Friday, the Bureau of Economic Analysis also reported the headline PCE (including food and energy) up 0.2% for the month. Year-over-year, it remained unchanged at 2.6%.

It is worth mentioning here that today’s inflation data creates more room for the U.S. Federal Reserve to switch to cutting rates this year – which may serve as a tailwind for the S&P 500 index.

Such a narrative is more in line with Lori Calvasina – the head of U.S. equity strategy at RBC Capital Markets who recently said she expects the benchmark index to hit 5,150 in 2024.

Also today, personal savings rate was reported to have declined sequentially from 4.1% to 3.7% in December. Members of the Federal Open market Committee are scheduled for their next rate meeting on January 30th.

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