No economist or market watcher has a crystal ball. So when it comes to making predictions for the year ahead, many take a conservative stance, making their bull or bear case with a litany of caveats.
However, in the past two years, investors have not yet hesitated. In 2022, when the Federal Reserve imposed an unprecedented interest rate hike regime in an attempt to spike inflation, investors sold their shares, leading to an 18% drop in the S. index
This year has been much more bullish for markets. The slowdown in inflation has allowed the Federal Reserve to take its foot off the gas, an encouraging sign that the central bank would possibly mount what’s known as a “soft landing” — that is, slowing the economy enough to cool inflation without pushing it into a recession. Investors reacted by lifting the S
What do market fortune tellers say about the year ahead?
With the Federal Reserve expected to cut interest rates in 2024, many are predicting a year for the economy and the stock market, though some are more enthusiastic than others.
Don’t expect a recession, but don’t expect things to go perfectly well either, says Kristina Hooper, global market lead strategist at Invesco. She calls for a “bumpy landing. “
“It’s a given that a comfortable landing will cause genuine damage. I think the economy will suffer,” he said. It’s hard to get hurt,” he adds, given the scale and speed with which interest rates have risen. Risen.
Still, he expects markets and the economy to recover in 2024, a sentiment echoed by Jay Hatfield, chief executive of investment firm Infrastructure Capital Advisors.
Recent economic insights “validate our theory that 2024 will be the year of rate cuts, which is very positive for stocks,” he says. A global interest rate cut means a smart year for markets and less chance of a recession, he says. So we’re probably more excited than ever. “
Today’s economy is precisely the picture of health. Persistent inflation has put pressure on customer budgets. “We’re already seeing customers being more selective in their purchases. This is reflected in many applications for benefits,” Hooper says.
Hooper also sees an increase in bankruptcies between 2023 and 2022, a trend he expects to continue next year. “We’re most likely going to see some companies, especially smaller ones, struggle to get funding,” he says.
We may also see a slight increase in unemployment as businesses continue to digest the Federal Reserve’s rate regime, a move that tends to have a sluggish effect on the economy, Hooper says.
These are all “very natural” parts of what happens when the Fed ramps up interest rates the way they did, she says. She expects any economic slowdown in early 2024 to be “relatively brief” with “some real acceleration and growth in the back half of the year.”
One thing reinforces Hatfield’s view that no recession is on the horizon: the housing market. “Almost every recession since World War II has been characterized by a housing crisis, but here we face a housing shortage,” says Hatfield. Therefore, in our view, the risk of recession is low. “
In short, Hatfield hopes that lowering interest rates will make it less difficult for corporations around the world to obtain financing and do business. With a resilient U. S. economy and a continued boom in synthetic intelligence, markets are on an upward trajectory in 2024, he said. Says.
Financial advisors caution against making drastic adjustments to your portfolio based on expected short-term market movements. However, it’s possibly time to rebalance your portfolio by cutting some of the money from your most sensible winning positions and adding to that. of lagging positions.
Hatfield expects a particularly good year for stocks in the real estate and money sectors, which had rough years in 2022 and rallied as high as the broader market into 2023.
Similarly, Hooper says a rebalancing could shift some of her assets from large, fast-growing U. S. corporations into spaces she sees as likely beneficiaries of a broad-based economic acceleration, such as small-business stocks and emerging-market names.
But for younger investors especially, trying to figure out what will happen in the market in the upcoming year is far less important than internalizing the lessons of market history and sticking to your long-term plans, says Hooper.
“It’s hard to know what’s going to happen. When we got to 2022, the Fed wasn’t expecting to raise rates and we weren’t prepared for the kind of annus horribilis that turned out to be,” he says. wonderful recovery in 2023. Hopefully this reminds readers that it is vital to stay the course. ”
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