The technology-heavy Nasdaq Composite index posted a solid return of 43% in 2023. Much of this rally was fueled by the surge in AI (artificial intelligence) and related stocks. Since AI isn't a passing theme but a significant long-term technological change, this tailwind can continue to contribute positively to the Nasdaq's performance in 2024.

Historically, the performance of the Nasdaq index, which is comprised mainly of growth stocks, has been closely related to broader economic cycles -- with stronger performance seen in periods of stable growth and innovation. Stronger-than-expected economic growth, low unemployment, and cooling inflation have increased optimism about the U.S. economy.

Many analysts now expect the U.S. economy to avoid a recession and, instead, witness some gentle slowdown in the coming months. Additionally, with the Federal Reserve expected to slash interest rates in the second half of fiscal 2024, the economy may even gear back to growth mode. All this is helping bolster investor confidence and bodes well for the performance of the Nasdaq index, especially in the latter half of 2024.

Continue reading

Source Fool.com