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As you know we were in 2022 and turned near year-end 2022. We stayed through 2023. While everybody was bearish expecting a recession at 2022 year-end, we were data dependent. Jobless claims and the GDP data were showing strength turning into 2023. I have never heard of a recession if GDP is positive and strengthening. That proved out and the market’s had a decent year.
So what’s with 2024?
I’m bullish on 2024.The Fed has a history though of acting correctly but typically only too late. So there’s some risk that rates stay too high for too long. But only after the Fed get’s a “D”eflationary scare that can get them to cut hard. That ‘cut hard’ can send the market up big.Ahead of that though, there’s still the likelihood that, true-to-form, the Fed reacts too late once again.There’s a chance for a stock market dip in early 2024. Contrary bearish sentiment in 2022 has turned into more contrary bullish sentiment in 2023. There’s also a more realistic chance for an economic slowdown based on the trend in the data.I’ll continue to be ‘data-dependent’ meaning I care very much about watching and figures. So far they are holding up nicely but threatening to reverse the recent bullish trend.Economies of course go in cycles based on sentiment and concerns. Worrying about a recession can slow business leaders’ buying forecasts which spirals and cycles into actual demand trends. Yes, it’s crazy to think, but the economy, it’s data and the markets are made up of people with emotions, feelings and that causes trends.Recession was avoided in 2023 I think mainly because we had a once in a lifetime force of people wanting to get back-to-normal post Pandemic. That offset and pushed-out normal potential slowdown relationships from high rates.How much legs will that have? I think it’s fair to say with the latest GDP and jobless claims readouts, those trends can recalibrate to normal relationships. These higher rates, if they stay up too long, can cause a slowdown.The Fed reaction though true-to-form, probably comes too late, probably by mid-2024. That can then send the market back up out of any weakness that was caused by too-late-no-action in early 2024.One interesting thing to think about now though is that the Fed plans to stop quantitative tightening only sometime after they start cutting rates. That can cause a spike in the yield curve which can cause a market risk as well based on history. That market reaction can also force the Fed to end QT which can then also send the market up big.So as always there’s fundamental and technical oscillations that we need to constantly respect with discipline because, as always there are multiple things at play.That’s how I see it. I think demographics are improving and we still have a window of a year-or-so before China’s real-estate issues can spread to a bigger problem. In the meantime the Fed’s oscillation of a soon-needed coming of a hard period of rate cuts coming too late will support the market by the end of 2024 but can cause risk early in the year.More By This Author:
I Think We Called 2023, What’s With 2024?
