Goldman Sachs projected a bullish scenario for stocks in 2024, with the S&P 500 expected to hit 4,700, signifying a 12-month price gain of 5% and a total return of 6%, inclusive of dividends.

While a 6% projected return for the broader market slightly underperformed the typical 8% average return seen in presidential election years, it depends crucially on sustained economic growth and a stable market environment.

Goldman Sachs outlines three key investment approaches for 2024:

1. Prioritize Quality Stocks: Amid ongoing concerns of a potential recession, Ryan Hammond advised focusing on stocks with strong quality attributes. Stocks in this basket include Alphabet, O’Reilly Automotive (ORLY), Church & Dwight Co (CHD), Accenture (ACN).
2. Invest in Growth Stocks: The analysts recommended growth stocks with high Return On Invested Capital (ROIC) in a stable economic environment. NVIDIA, Enphase Energy (ENPH), ServiceNow (NOW), Eli Lilly and Co. (LLY) and Albemarle Corporation (ALB) are among the top picks.
3. Opportunities in Undervalued Cyclicals: There’s potential in cyclicals currently priced for a recession risk that exceeded Goldman Sachs’ baseline forecast. According to GS analysts, economic surprises to the upside could make companies such as Toro Co (TTC), Alaska Air Group (ALK), Delta Air Lines (DAL), Crocs (CROX) and John Bean Technologies (JBT) are particularly attractive.