The 400k Investment Project: 2024 Market Outlook

“…one slightly cynical thought is that the US Treasury needs rates back down to service the US’s debt burden. $33 trillion dollars of debt being serviced at a 4% interest rate is problematic..."

In subsequent posts I will discuss a number of 2024 thematics which I believe will all provide very interesting investment opportunities. But first, let’s discuss the macro environment we are faced with as 2024 kicks off.

Intro

The year 2024 is shaping up to be anything but dull. Amidst a backdrop of complex macroeconomic and geopolitical factors, there's a palpable "wall of worry" that investors are grappling with. Fears of a looming recession are juxtaposed with apprehensions about rising yields, partly attributed to transitory inflationary pressures like the Red Sea/Suez Canal shipping turmoil. This peculiar mix creates an unusual financial landscape. Yet, interestingly, such a wall of worry, gradually giving way to optimism, often sets the stage for a robust upward market trajectory.

Now, it's crucial to acknowledge that these concerns won't just vanish. The merits of these economic apprehensions are valid and, at times, puzzling, especially considering the lack of more pronounced economic downturns in the past year. However, as we adapt to higher interest rates - the 'new normal' - the likelihood of a significant market downturn diminishes. If the market can maintain stability at current rates, as evidenced by equity markets hovering near or reaching new highs, then any potential rate cuts could significantly amplify this positive momentum.

Another key driver for market growth lies in the realm of Artificial Intelligence (AI). AI's growing influence in enhancing worker productivity and boosting the profitability of major corporations, especially tech giants, is likely to support higher Price to Earnings (P/E) ratios. While high P/Es are currently cited as a barrier to market growth, AI's impact could justify these elevated valuations.