Citi names its top stock picks for 2024 to navigate a potential slowdown
An economic downturn may loom in the new year, but Citi still thinks stocks will come out on top in the next year. While Citi economists project a recession sometime in the middle of 2024, the bank says that previous earnings recessions have already been priced into the stock market within the last two years. "Thus, a key debate is the degree to which investors and corporates have implicitly lowered their expectations as recession has been a focus for well over a year. We argue that earnings will prove resilient relative to historic recession compares," wrote Citi U.S. equity strategist Scott Chronert in the bank's North America outlook. While the S & P 500 is currently trading less than 1% from its all-time closing high, set in January 2022, Citi thinks the index could blow this record out of the water with a year-end 2024 target of 5,100. That's 7.3% higher than where the index closed Friday and 6.3% higher than its all-time high closing price. Chronert said the emphasis for investors next year will be to focus on "idiosyncratic influences, with a related focus on productivity, further driving stock specific volatility." The strategist also recommended four considerations as a general rule of thumb. "First, on the heels of the Q4 rally, we advocate buying pullbacks," he said. "Second, structurally, companies with compelling longer-term outlooks, perhaps enhanced by generative AI potential, provide a means of navigating economic weakness, while benefitting from an eventually less hawkish Fed." Cyclical companies could also provide an attractive barbell to their growth counterparts, especially since their valuations usually benefit from more open monetary policy, he added. Chronert also underscored defensive names for their high earnings growth visibility. Within the report, Citi also shared some of its top stock picks for each sector. Here are some of the included names: Citi selected KeyCorp , the parent company of KeyBank, as one of its most preferred U.S. bank stocks. Analyst Keith Horowitz currently has a $15 target price on the name, implying roughly 5% upside from Friday's close. "Heading into a credit cycle, we prefer names with below average credit risk and strong [ net interest income ] upside potential from fixed asset repricing. Given the structure of the loan book and receive fixed maturities, KEY stands to benefit the most from repricing tailwinds," he wrote. Shares of KeyCorp have shed about 17% this year. Within airlines, Citi analyst Stephen Trent listed Delta and United as two of his top picks. "Structural, post-pandemic changes mean lower block hour utilization, more blended travel and more premium economy [passenger] flow. These trends should still heavily favor network airlines, such as Delta and United," he wrote. Trent believes Delta could rally 36% to reach his $56 price target, while his $71 price target for United implies a nearly 67% upside. Citi analyst Jason Gursky highlighted Boeing and L3Harris Technologies as two of his top picks within the aerospace and defense category. His $271 price target implies a 4% upside for Boeing, while his $238 forecast for L3Harris means the stock could rise 14% from Friday's close. As catalysts for the stocks, Gursky pointed to growing military spending in the U.S. and Europe and the post-pandemic airline travel recovery. "In our view, these dynamics should allow for improved cash flows and sustained earnings growth over the next several years for the companies in our coverage universe," he wrote. Citi also listed General Motors as one of its most preferred stocks for the U.S. automobiles sector, FedEx for transportation and Rockwell Automation for diversified industrials. — CNBC's Michael Bloom contributed reporting.