Were you too bullish or bearish in 2023? It is always challenging to predict the future, especially in the complex world of financial markets. Well, it is that time of the year again. Investors are taking out their crystal balls to set up their portfolios for 2024, but many are wary after the unexpected turn of events that materialized over the past year.
Damn it! Some of Wall Street’s most famous analysts got it wrong in 2023. I have no doubt that they are all remarkable people. They will probably get it right this year. Nobody knows me although I was bullish on the risk assets last year resulting in positive outcomes.
The convergence of major global elections that account for almost half of the world’s population in 2024 adds an additional layer of complexity to the investment landscape. Geopolitical tensions and policy changes resulting from these elections can significantly impact financial markets and investor sentiment in the coming months.
Guess what? The only thing that can be said with high certainty about the year ahead is that the markets will be different from 2023. Rising rate cut expectations have rippled through the capital markets, weighing on yields and the dollar, while boosting the attractiveness of risk-assets. The boat is starting to load heavily to one side. I’m bullish although it will not be as easy as it was in 2023.
Instead of making many predictions, the plan here is to monitor the fundamentals, sentiment, and price action to manage exposure actively. Navigating 2024 will require maximum focus, flexibility, and adaptability. Enjoy the fun ride.
With social media all around us, investors get so many opinions and so quickly. In the short term, emotion trumps everything else. Beware of extreme predictions, whether overly optimistic or pessimistic which often carry a high level of uncertainty and risk.
One thing I learned from my decades of experience in global financial markets is that rational investors should never over-react to anything. For those who are always obsessed with the US dollar, it is not going to “collapse” this year.
People generally don’t want to own assets that haven’t done well, and everyone wants to own assets that have done really well. This desire often causes trends that are already going strong to get a little extra boost – performance chasing. This happens even though both the bull and bear arguments are well understood.
Let me also share with you a story about a bank run in Hong Kong in the early 1980s. It was caused by a long line in front of a pastry shop that just so happened to be right next to a bank. People assumed the line was for depositors taking their money out of the bank, word spread and soon the bank run was on for no other reason than the herd mentality.
Oops! Before I hit the “panic” button, my apologies for the attention-grabbing title of this post.