🚨 A warning for 2024

What’s going on here?

The stock market pulled off an underdog story that Hallmark movies could only envy, emerging as a hero after months of non-stop drama.

What does this mean?

Economists weren’t especially hopeful about 2023. They might’ve had aspirations of happy homes and exotic vacations, sure, but that was dampened by their predictions of recessions littering the world’s economies. After all, hampered supply chains were driving inflation higher, and central banks were fighting back with economy-bruising interest rate hikes. By most accounts, stocks should’ve ended up in the dumps. Yet, US and European indexes are closing out the year around all-time highs, while Japan’s stocks are at their highest in over four decades.

Why should I care?

For markets: Money talks.

If your festive lunch turned serious, you likely heard pundits praise the end of interest rate hikes for bringing about stocks’ newfound sprightliness. With inflation finally headed toward central banks’ targets, they can start holding rates where they are – or even trimming them back down – to stabilize their economies. But that doesn’t quite explain it: interest rates are way above their ultra-low levels from a couple of years ago, and yet stocks are near their peaks despite there being no sign of a return to those lower rates of yesteryear. The difference, then, may be down to companies’ savvy cost management, with many prudent firms passing their higher costs onto customers to protect their bottom line, making their stocks look like decent bets even in trying times.

Zooming in: It’s the most wonderful rally of the year.

Look at the world through a star-spangled lens, and it’s impossible to ignore artificial intelligence’s influence on the US market. The tech blew up in January when Microsoft bought 49% of ChatGPT-creator OpenAI for $10 billion, lending credibility to the theme previously most famous for dystopian movies. Investors then rushed toward any super-smart-tech-related stock to emulate the titan’s move, a flurry that meant the industry’s stocks were responsible for most of the S&P 500’s progress this year.

What’s going on here?

The stock market’s set up for a calmer year in 2024, although investors may end up nostalgic over the dizzy spells of 2023.

What does this mean?

Most folk will wake up on January 1st with a thumping headache and an unquenchable thirst. But there’s more than bacon and electrolytes on hand to keep you steady: with inflation letting up, interest rate cuts ahead, and optimistic company forecasts, 2024 could be a much calmer year for investors. Thing is, the effect of most of those market catalysts will already have been baked into stock prices, meaning it’ll take some even better – and most importantly, unexpected – news to pull the market even higher.

Why should I care?

For markets: Apocalypse later.

Artificial intelligence could become that surprise – but hopefully a pleasant one. If the tech manages to trickle into non-tech firms, cutting their costs and plumping their profits, it could spark something special in the market. But that’s the most optimistic outcome: artificial intelligence could wipe us out sooner than you could say “I, Robot”, but it’ll likely land somewhere in the middle, cruising through more development stages without transforming the world of business (yet).

The bigger picture: Patience is a virtue.

Mind you, if you’re laser-focused on 2024, you’ve already put yourself at a disadvantage. The virtues of investing with a long-term view have been celebrated for centuries, and for good reason. If you believe that economies will develop over time, which they tend to do as populations grow and productivity improves, then you’ll expect company profits to plod along too. So if you like it simple and have the patience, holding a bet on the market for years is hard to beat.