Monthly Outlook: January 2024
As we embark on another year, we first must get through the countless predictions and forecasts. John Kenneth Galbraith said, “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” Similarly, Yogi Berra said, “It’s tough to make predictions, especially about the future.” All kidding aside, everyone knows that most forecasts are wrong, and sometimes very wrong. But it’s just too irresistible to try, and we seem to be hopelessly addicted to people who claim they can see the future. Take, for example, the Barron’s Roundtable “Year Ahead Outlook.” Twelve leading strategists from major Wall Street firms are interviewed, and their year-ahead stock market and interest rate forecasts are recorded. It’s laughable how wrong they are, year after year, but the survey sure sells newspapers!
Not to be outdone, we offer our own 2024 Outlook, below. Unlike most, our Outlook is practically guaranteed to be right! That’s because we’re evidence-based and we only forecast what we already know to be true. We call it “nowcasting.” Maybe we’re cheating in the forecasting game, but we’re not foolish. Oprah Winfrey wrote a book, What I Know For Sure, and that’s how we form our 2024 Outlook. We know for sure that markets will be volatile, both up and down. There is almost 0% chance that they go perfectly sideways. There will be bullish and bearish markets in 2024. You can bank on it. We also know for sure that we have no control over market trends. But we do have control over when we buy and sell them.
Bullish in 2024
As we start 2024, nearly every market is trending higher, meaning they are above their price trendline (as we define it using moving averages). US Stocks, INTL stocks, Bonds – all of them – are zig-zagging higher. For this reason, we start the year “all in” with almost no uninvested cash. This is very bullish because a market in motion stays in motion until it doesn’t. And for now, they’re moving up, and we’re capturing the growth. We also see a lot of money parked in high-yielding money market funds and U.S. T-bills that could come back into stocks and bonds in 2024. S&P analysts are bullish after analyzing thousands of companies one-by-one, and are predicting earnings to rise about 13% in 2024. Lastly, U.S. Congress remains divided and unlikely to agree on much in 2024. This means they’ll rubber-stamp continued deficit spending, which is stimulative.
Bearish in 2024
The Federal Reserve raised Fed Funds 5.25% over the past eighteen months and recently signaled that interest rates have peaked. Their work is done, and inflation and interest rates are coming down. But that may be the case because the economy is slowing down, too. There is a real chance that we roll into a recession in 2024 and indicators like an “un-inverting” yield curve and rising unemployment rate are signaling as much. Valuations like price-to-earnings and market cap-to-GDP are at 100-year high levels, normally only seen at market peaks. This adds bearish risks to 2024, as well. Lastly, 2024 is another Presidential election year and it’s shaping up to be a doozy! This will only add to uncertainty and investors could sell to de-risk until the outcome is clearer.
Confident in 2024
We feel confident when we have certainty and control in a situation. It’s the comfort zone that we all strive for. Although markets are volatile and loaded with uncertainty, we can reframe that as an opportunity. We are certain that markets are uncertain! We count on it, as it provides us with tradeable trends to profit from. And we know that we don’t control the markets in any way, but we can (and do) control ourselves. We’ve created a systematic, rules-based strategy that measures the trend of every market. Our strategy triggers a buy signal when the price moves to up-trend and it triggers a sell signal when the price rolls over to down-trend.
Our 2024 Outlook is optimistic and full of confidence. We are certain that markets are uncertain and volatile. And we have unemotional controls and signals in place to invest with the price trends for growth and protection, if/when needed. Thank you for your confidence in return. Happy New Year and we look forward to guiding you through another great year!