If 2022 was a year in which nothing went well for investors, 2023 became a year where most investors could hardly do anything wrong. A moderate portfolio mix of 60% stocks and 40% bonds is on track to return around 17% this year after having a terrible 2022. On December 13, 2023, the Dow Jones Industrial Average closed in record-setting territory above 37,000 points for the first time. This announcement was a surprise for many Americans as they still feel the lingering adverse effects of high inflation and the Federal Reserve’s spree of interest rate hikes. As we look towards 2024, interest rates, the health of the economy, and geopolitical tensions look to be the hurdles investors face.
All Eyes on the Fed
Prospects of interest rate cuts coming in 2024 have started giving new life to consumers. The Fed has signaled that the rate cuts could come soon if inflation continues its current trajectory. Although the Fed has hinted at three rate cuts in 2024, it may be prudent to expect fewer cuts as the Fed continues to be cautious in its approach to bringing down inflation.
Over the past 18 months, investors have heard a lot of chatter about a “hard” or “soft” landing for the economy, but in 2024, we may find out if the Fed has cooled the economy without tipping it into a recession. The labor market has continued to be tight, but other areas of the economy have been strained. Consumer spending has been propping up the economy, but it has yet to be seen if this will be enough to keep the economy from dipping into a recession.
Turbulence Here and Abroad
Another lingering theme in 2024 will likely be geopolitical tensions and election politics. The war in Ukraine is approaching its second anniversary, the conflict between Israel and Hamas strains Middle East relations, and China continues to infringe on the sovereignty of their neighbors. America’s role in the world will be center stage in 2024. Political views today are evenly split, causing vocal minorities from each party to encourage radical ideas. Expect market volatility during 2024 as America looks to set a course for the next four years.
Tune out the Noise
Investors should ignore the daily headlines and focus on long-term investment opportunities. Picture a person playing with a yo-yo while walking up a hill. If the person focuses all their attention on the yo-yo, they can be consumed with the constant ups and downs and lack of progress. However, if they lift their head and focus on the summit, then they can see with every step they take, they draw closer to their goal. For investing in 2024, make a plan that focuses on your goals and ignore the noise from the media. Market volatility presents opportunities to either make mistakes or take advantage of the mistakes of others. Stick with your plan and concentrate on achieving your goals.
As we enter the new year, I wish you and your family happiness, health, and prosperity. May you find peace and joy in the things that make a difference. Thank you for your continued trust and business. If you would like to discuss your financial future or make updates to your plan, please call our office and I look forward to working with you in the coming year.
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Opinions expressed by the owner of the attached content does not reflect an endorsement by the named broker dealer or its affiliates.