Predictions 2024: the year of irrationality
The beginning of year 2023 was full of negative sentiment, yet the S&P 500 delivered a return of 24%. Is the year 2024 the other way around? I have some doubts.
When talking markets, I was mostly wrong about 2023 as I was way too negative. Therefore, this year I am gradually changing my wardrobe from black t-shirts to white ones to keep up with the good spirits. As they say “New year new me”.
These predictions are not something I want to happen & the rational part of my brain disagrees with many of them. And yes, I know some of them feel super unlikely & probably that’s because they are, yet things rarely are the way we expect.
Here we go:
1. S&P 500 goes bonkers & reaches 6,000 (30% gains).
U.S elections are coming up
U.S. Election years tend to be good for markets, i.e. the index has recorded positive returns in 20 of the 24 election years since 1928. With that being said, I think that Biden & Democrats are likely to do everything everywhere all at once; their odds look bad & that will force them to go full populist. Debt to GDP is already record high but it will climb higher as it will not be possible to sell budget reductions as a great idea to the voters. Brrrr brrrr brrr.
AI continues its victory march
Generative AI continues to shine with new use cases & technologies piling up. If we reflect on the last 12 months, then the progress feels unreal, yet this is just the beginning. It can be implied that it is already impossible to distinguish between ChatGPT & most human beings. The power of compounding will be in full force & new productivity gains will be achieved.
Magnificent 7 takes a breather, while others catch up
The growth will come not only from the magnificent 7 but also from the other 493 companies. However, some of the magnificent 7 will deliver a second consecutive 100% annual gain. I bet on Meta due to lower P/E (20x), and the potential increase in advertising revenue due to elections (US & India) & I speculate that they will start monetising WhatsApp.
2. Inflation does not go away in the US & Europe.
The economy remains healthier as it may seem
This happens due to low unemployment (read decent purchasing power) & some unexpected events. A decent example is the current events in the Suez Canal & Red Sea region with Houthis firing at ships that may drive shipping costs higher mostly between Asia & Europe.
Consequently, interest rates stay high throughout the year, probably one interest rate cut just to help with Biden's re-election & to encourage the markets; Europe will just mirror the US.
3. Gold & crypto melt-up.
ETFs do help the industry
Approvals of Bitcoin & Ethereum ETFs help with crypto adoption in the institutional investor portfolios. This gradually drives the price of both cryptocurrencies, while others follow without any good reason. BTC reaches $100k & ETH $6.9k. Plot twist - Elizabeth Warren announces that Bitcoin is here to stay.
Gold shines like a dimond
Gold price is driven higher due to (1) its safe-haven nature with the globally unstable geopolitical situation and (2) institutional investors becoming wary of the red-hot stock market. China, India & Russia keep on buying. Gold price nears $3k.
4. The death of Mainstream media picks up the pace.
US presidential election punches traditional media
More & more people give up on the mainstream media & consume the content of independent content creators on X, YouTube, Substack & so on.
This will be made especially obvious with the US presidential election:
Debates happening on X with Joe Rogan (or Elon) as a moderator.
TikTok takes a major role in US presidential elections; China denies its involvement.
5. Geopolitics remain turbulent. Existing wars rage on.
KSA as peacekeepers
The US decreases their support to Ukraine & Israel to a minimum as it becomes very unpopular among US voters. In the meantime, the Kingdom of Saudi Arabia is the peacekeeper in the Middle East region; and gains even more influence on the global stage. Global tech & other corporations continue to move their regional HQs to the nation.
TikTok ruins everything
US & China relations continue to deteriorate due to some relatively minor things, i.e. US tries to ban TikTok, China limits usage of US products, etc. Gradually both countries focus on becoming independent from one another before the inevitable Taiwan tensions. Nevertheless, I bet that China does not do anything before the US election, as a more nationalistic US would be beneficial for China’s goals.
6. Collective ignorance of global warming continues.
Paris agreement, what?
New records of annual CO2 emissions are reached with China leading the way & India pumping their numbers up.
However, it gets more interesting by looking at the data on a per capita basis. The US remains the undisputed champion!
In the meantime, El Niño will help to deliver new record highs. Here is a really insightful read on the climate phenomenon & its potential impact.
Long live the fossils
Long story short, everybody continues to promise to transition away from fossil fuels, eventually. At the same time, Exxon Mobil delivers one of their best years with the stock gaining more than 30% in the year 2024.
7. Once again, the world does not blow up.
We good
Instead, the world, on average, becomes a better place to live in. I will leave you with these data & sure do recommend the respective book Factfullness. If you are not into the reading then go for the author’s TED talk.
Osempic treats the world
On the healthcare front, Eli Lily & Novo Nordisk continue to shine with their weight loss drugs & their combined market cap breaches $1.5 trillion (currently around $1 trillion). Valuation becomes so out of touch that everybody collectively scratches their heads, but hey obesity is real & the market potential is crazy.
Enjoy the song. Wicki-wild wild (doo-doo-doo-doo-doo).