A Bloomberg article grabbed my interest while I was searching for something on Google at the airport waiting for the connecting flight. It was about the 10 potential surprises capable of impacting investors throughout 2024.
Originating from the insights of the late investor Byron Wien, who passed away in October last year, the list from the BofA Securities outlines various scenarios with the potential to influence market dynamics.
Mr. Wien, the former Morgan Stanley and Blackstone strategist was known across Wall Street for his annual list of top surprises. Admittedly, everything on the list probably had a less than 50% chance of occurring.
I learned a lot from him in my career. Markets are so much more fluid than they were in the past. All I know is they will continue to go up and down (that is supposed to be funny). Oh ya, remember that Wall Street has already priced in 6 rate cuts by the Fed in 2024. That is not likely to happen in my view.
Here is a section:
Geopolitical risk lashes the Magnificent Seven. The IPO machine roars back. Japan emerges as the world’s best developed market. Another potential wildcard is stocks luring back investors all thanks to high bond taxes – that’s at the top of the list according to the bank’s strategists led by Jared Woodard. Despite the most aggressive rate-hiking cycle in decades, companies could sidestep a surge in bankruptcies, they said.
“This year any large moves in markets may be self-limiting. Big drops in stocks could prompt Fed cuts; big rallies further ease financial conditions and rekindle the very inflation that the Fed thought it had smothered,” the strategists wrote. “It’s a recipe for a range-bound, if volatile year, at least in the US.”
For now, they favor credit over equities and bonds in case of more market swings and warn traders not to get “shaken out” of inflation hedges.
Many market prognosticators, including Wien, were caught wrong-footed last year by predictions that the US stock market would bottom in 2023. Instead, the S&P 500 jumped 24% while the tech-heavy Nasdaq 100 surged nearly 54%, its best annual gain since the dot-com boom of the late 1990s.
“It’s a worthwhile exercise to think of scenarios that some investors may have not considered, or have assigned a very low probability,” BofA strategists wrote.
Other predictions for 2024 include consensus calls for the US to walk a narrow path to 2% inflation, investors will demand a premium to own longer maturity US government debt, a comeback in biotech and pharmaceutical stocks, investors will get more realistic about “the need for reliable, affordable power” and as the US presidential election nears, the prospect of a more business-friendly environment will be “stoking animal spirits and prompting a greater allocation to equities.”