Over the last couple of days, I have engaged with numerous investors and partners spanning diverse fields to discuss our outlook for 2024. The predominant insight gleaned from these discussions is a lack of strong conviction regarding the trajectory of this year.
Should we be worried about what is going to happen in the next 12 months or so? If you are worried you should remember that the stock market can rise despite prevailing worries, a phenomenon often described as “climbing a wall of worry.”
Time flies when you are having fun and January will be in the books soon. Well, I don’t really care about the January’s performance and there’s a bad joke about Elon Musk selling all his shares. The conventional market wisdom, once encapsulated in the adage “as goes January, so goes the year,” suggested that a negative performance in the stock markets during January would likely result in a negative full-year outcome.
Since 1990, there have been 15 instances where the S&P 500 experienced negative returns in January. Surprisingly, only six of these cases translated into negative full-year returns, accounting for just 40% of the situations. Therefore, a negative or turbulent January does not necessarily indicate an impending down year for the markets. I expect January to be a mixed month for global markets.
Leading the world, US stocks managed to scale new peaks with yields rising to YTD highs. The Magnificent Seven notched a new record on January 19 despite real yields that were a dozen basis points higher on the week. Still, some of the big boys on Wall Street continue to assert that we are currently in a bear market. The divergence in opinions underscores the complexity of interpreting economic conditions and market dynamics.
Well, for one thing, I could be dead wrong about what Powell is planning to do. I’ve been wrong before, believe it or not. More than once, I’m told. Still, I don’t expect fireworks from the upcoming Federal Reserve Meeting next week.
My easy bet is that they maintain the current interest rates at 5.25% – 5.50%. Powell’s press conference will inevitably involve a delicate balancing act. The policy statement will be cautiously amended.
When traveling down the highway at a speed of 90 miles per hour, symbolizing a rapid escalation in rates unprecedented in history, it is advisable to refrain from abruptly shifting into reverse, representing a reduction in rates. Rather, a more prudent approach may involve transitioning into a “Neutral” stance, which accurately reflects the current position of the most powerful central bank in the world.