Tech and IPO market outlook: What to watch in 2024

The Tech sector has certainly dominated Wall Street with the Magnificent Seven and endless discussion on AI, but can it continue? In addition, IPOs have had a lackluster year with several companies making their IPO debut but failing to really capitalize on the momentum. Will that change for 2024? Jay Woods, Freedom Capital Markets Chief Global Strategist, joins Yahoo Finance to discuss both of these sectors and how they will perform next year.

Woods explains why he is enticed by IPOs. "The thing that I do like is the beaten-down IPOs, from a year ago, two years ago, like Affirm, Coinbase, they are starting to come back ...They are real companies and they have good balance sheets now. We're starting to see them pick up. So I look for that," Woods says. "Speaking of IPOs, we had five solid IPOs, and they're starting to trend toward their year-end highs. That's good momentum. The IPO market itself should pick up. People are waiting for conditions to get better, what's better than all-time new highs and a Fed easing? So look for a lot of interesting companies."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: When we think about some of the YOLO trade that could reemerge if you see cutting start to commence. That typically will prevail and-- well, not prevail, but that typically will lead to some of the riskier players within the market as well. And we had a guest on earlier that was talking to us about some of perhaps the cautious yet calculated YOLO plays, what are those from your perspective?

JAY WOODS: Well, those are always risky. When you get a momentum like we're seeing now, the tide does tend to lift all boats. And some of these old beaten down names will catch bids. We've seen it with the meme craze.

The thing that I do like are some of these beaten down IPOs from a year ago or two years ago, like a firm, Coinbase, they're starting to come back. Watch a SoFi. They are real companies and they have good balance sheets. Now we're starting to see them pick up. And so I look for that.

And then speaking of IPOs, we had five solid IPOs and they're starting to trend towards their year-end highs. That's good momentum. And now, the IPO market itself should pick up. If people are waiting for conditions to get better, what's better than all-time new highs and a Fed easing?

So look for a lot of interesting companies. And the one I really want to watch, Kim Kardashian, SKIMS. I mean, it's a $4 billion company. She does no wrong in the business world. Imagine the hype and the euphoria from the retail investor if they see her ringing that New York Stock Exchange opening bell and getting a chance to invest in her.

And then you have companies like Shein that have announced. Panera coming back. And then everyone's hoping Stripe and Databricks come to market. I think the conditions are there. And given the low bar the last two years in the IPO market, it should be clear.

SEANA SMITH: It's incredible to think about all the consumer facing names that could be going public in the first half of next year. Jay, the number four point on that full screen that we just had on the screen was what you're seeing in terms of the opportunity with housing. We certainly have seen a rally here and a number of the homebuilder stocks. What does that set up look like in 2024?

JAY WOODS: Yeah, the homebuilders are another sector that have, kind of, gone full circle. And if you told me in the beginning of this year, when everyone was calling for a recession, that the mortgage rates would go to 8% and the housing markets would be at all-time highs, I think you're crazy. But now there's a recency bias. There's a built-in bias.

People that have been waiting and complaining that rates have gone up so far, so fast when they were at 8%, they threw in the towel and you saw just things fall apart. And that happened August through the beginning of November. Now, we're making 52-week highs in the sector itself and it should cool off.

Mortgage rates 7% lower and trending lower. People will go out and they'll forget that they were complaining about it a year ago. And that recency bias will kick in because now it's on sale. So I think the housing market, the demand is still there. With mortgage rates coming in, I think it's a sector that will have legs going forward into the new year.