10Mon
Good work, and a bit of luck was probably involved too! 😉
However, I don't quite share your optimism for 2024. In the past, interest rate cuts almost never bode well. Central banks don't cut interest rates because they want to, but because they have to, usually because the interest rate hikes start to eat into the economy. If interest rates fall, stock market prices usually fall shortly afterwards. And if you look at the speed of falling bond yields, which usually anticipate key interest rates, then 2024 is likely to be very bumpy.
My base scenario: first few days down a little (profit-taking), up to new ATH by April (expectation of interest rate cut), then down until November (recession fears, Trump election) and up again a little in December (looking ahead to 2025). Overall, I expect a final level noticeably below today, around 10-20%.
What is your base scenario that makes you so optimistic?
However, I don't quite share your optimism for 2024. In the past, interest rate cuts almost never bode well. Central banks don't cut interest rates because they want to, but because they have to, usually because the interest rate hikes start to eat into the economy. If interest rates fall, stock market prices usually fall shortly afterwards. And if you look at the speed of falling bond yields, which usually anticipate key interest rates, then 2024 is likely to be very bumpy.
My base scenario: first few days down a little (profit-taking), up to new ATH by April (expectation of interest rate cut), then down until November (recession fears, Trump election) and up again a little in December (looking ahead to 2025). Overall, I expect a final level noticeably below today, around 10-20%.
What is your base scenario that makes you so optimistic?
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@Epi probably more luck than sense, as always :D I would never have seen the performance of NVIDIA and Palo Alto Networks coming. And Meta too, I had them on my hit list for a short time at the beginning of the year.
It's very interesting to see how different perspectives are. My thoughts are as follows:
- Falling bond yields and any interest rate cuts will make interest-bearing investments less attractive compared to equities - This leaves a lot of money available from bonds, money market funds or call money accounts that can flow into the equity market
- If we do not experience a recession in 2024, the real economic pressure on companies will not be as high and financing costs will be reduced at the same time
But for me the main reason: Tech
I can well imagine that your points will come true, but that the stock market will (once again) decouple from the real economy. On the one hand, unprofitable tech companies benefit from lower financing costs and become attractive again. More importantly, a slight downturn is not really dramatic for most tech and software companies. The AI trend will continue to dominate and investments will have to be made. All the software as a service companies will also continue to earn their subscription fees.
That leaves the advertising sector with Alphabet and Meta. In recent years, we have also seen that companies are more likely to save on traditional advertising than on online advertising.
All in all, I believe that tech will continue to perform and can therefore compensate for weaknesses in other sectors (I can well imagine a scenario in which 10% of the stocks in the S&P 500 outperform the others again).
-> Last but not least: I am an unreconstructed optimist ;)
It's very interesting to see how different perspectives are. My thoughts are as follows:
- Falling bond yields and any interest rate cuts will make interest-bearing investments less attractive compared to equities - This leaves a lot of money available from bonds, money market funds or call money accounts that can flow into the equity market
- If we do not experience a recession in 2024, the real economic pressure on companies will not be as high and financing costs will be reduced at the same time
But for me the main reason: Tech
I can well imagine that your points will come true, but that the stock market will (once again) decouple from the real economy. On the one hand, unprofitable tech companies benefit from lower financing costs and become attractive again. More importantly, a slight downturn is not really dramatic for most tech and software companies. The AI trend will continue to dominate and investments will have to be made. All the software as a service companies will also continue to earn their subscription fees.
That leaves the advertising sector with Alphabet and Meta. In recent years, we have also seen that companies are more likely to save on traditional advertising than on online advertising.
All in all, I believe that tech will continue to perform and can therefore compensate for weaknesses in other sectors (I can well imagine a scenario in which 10% of the stocks in the S&P 500 outperform the others again).
-> Last but not least: I am an unreconstructed optimist ;)
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