What are we expecting from the markets in 2024? Let’s take a look.
Expect surprises. No one can accurately see into the future. As we saw in 2023, expect the unexpected.
We believe that having a diversified portfolio is the best way to protect yourself against market volatility and pursue your financial objectives. While it won’t completely shelter you from market pullbacks, it has historically proven to be a strong strategy that can help you reach your financial goals.
Although volatility can be unsettling, it is often temporary, as demonstrated by the failure of Silicon Valley Bank last year and, so far, the ongoing war in the Middle East.
If we were to take a stab at issues on the front burner, we’d start with the economy.
If inflation continues to slow down, it will take pressure off the Federal Reserve, and rate cuts could come sooner rather than later.
Investors are currently betting on the soft-landing scenario. In this scenario, pricing pressure eases while economic growth slows down slightly, avoiding a big hit to corporate profits. This scenario helped drive stocks last year.
While the Fed didn’t reduce rates in 2023, the year followed a similar pattern to 1985, 1995, and 2019, when the Fed was able to engineer a soft landing, and stocks performed quite well.
But, if economic growth slows too much, stalls, or a recession ensues, i.e., the hard-landing scenario, any tailwinds from a faster pace of rate cuts might easily be offset by weak corporate profits, as we have seen in the past.
Rate cuts in 1974, 1990, 2001, and 2008 failed to prevent a slide in stocks until investors anticipated an economic upturn.
In other words, rate cuts that occur because the Fed “can,” not because they “must,” is the more preferred path, in our view.
We hope you have found this review to be informative. If you have any inquiries or wish to discuss any other matters, please don’t hesitate to contact us.
Thank you for choosing us as your financial advisor. We are honored and humbled by your trust.
Original source: Horsesmouth
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk