According to senior portfolio manager for U.S. equities at Morgan Stanley Investment Management, Andrew Slimmon, the U.S. stock market is likely to keep rising next year as investors move out of cash and chase the ongoing rally. Slimmon anticipates that the S&P 500 index, which is nearly back to its early 2022 levels, will see increased optimism among investors who do not want to miss out on potential gains.

While Slimmon foresees a potential correction in stocks before the end of 2023, he remains bullish on the stock market in 2024. He believes that despite possible anxieties created by "cynics" over the Federal Reserve cutting its benchmark rate, the market will eventually realize that the cuts are due to the end of the inflation cycle rather than the economic cycle.

Slimmon expressed confidence in the U.S. economy, stating that he believes it is in decent shape. He does, however, expect a pullback in stocks when the Fed starts cutting rates. Although he predicts that the market will be up in 2024, he does not anticipate it to be as strong as the performance seen this year.

The S&P 500 index has experienced significant growth in 2023, surging by 24.2% through Tuesday, according to FactSet data. The index closed at 4,768.37 on Tuesday, just 0.6% below its record closing high from January 3, 2022. This positive trend was further reinforced by the index achieving a seventh consecutive week of gains, marking the longest streak in six years.

Slimmon's early October prediction of a Big Tech-led rally in the fourth quarter has proven accurate so far, with the index gaining 11.2% this quarter. He admitted that he did not expect Federal Reserve Chair Jerome Powell's pivot toward cutting rates in 2024 during his news conference on December 13, which followed the Fed's policy meeting.

Although many investors anticipate a broadening of the market beyond Big Tech stocks in 2024, Slimmon suggests that these stocks, known as the "Magnificent Seven," may continue to rise next year due to their strong earnings and anticipated stock buybacks. He also expressed his preference for holding growth stocks, as well as value equities in the financials and industrials sectors.

Looking ahead, Slimmon expects the U.S. stock market to rally once the S&P 500 breaks above its record close from early 2022. He envisions the index potentially reaching the 5,000s by the end of 2024, following a potential correction fueled by misguided concerns over the economy when the Fed decides to cut rates. Despite uncertainties, Slimmon remains encouraged by the performance of the economy, observing an earnings recovery after a relatively flat year-over-year earnings.

In conclusion, Andrew Slimmon's optimistic outlook for the U.S. stock market in 2024 emphasizes the ongoing rally and the potential for continued growth, albeit at a somewhat slower pace than seen this year.