In the enigmatic and not well-defined 2024 stock market, investors are navigating a terrain shaped by economic recalibration and shifting investor sentiment. The year has introduced a paradoxical scene: despite the S&P 500’s recovery from a previous slump and a short-term rise in market optimism, the horizon is clouded with the potential for economic downturns and a reevaluation of risk assets.
The latest trend indicates that the buoyancy from a rally in equity markets may be waning as several factors converge to challenge the upward trajectory. Among these is the normalization of liquidity levels. Savings from the COVID-19 era, which provided a cushion for consumer spending, are dwindling. J.P. Morgan Research suggests that by mid-2024, only the top echelon of income earners will have retained any significant financial advantage over their pre-pandemic status.
This shift in liquidity is not without consequences. The market is exhibiting signs of complacency amidst a backdrop of declining consumer strength, manifesting in rising credit card and auto loan delinquencies. Moreover, the performance of risk assets is under scrutiny, with analysts expressing caution over their near-term prospects.
The pulse of the market suggests that the initial welcoming of inflation decline may soon turn into anxiety, as investors ponder whether this signals a healthy economic adjustment or the prelude to a recession. This dichotomy is further complicated by geopolitical developments that impact global trade, commodity prices, and the overall macroeconomic outlook.
Valuations of risk assets are now deemed expensive, leaving little room for positive surprises. Without a significant reduction in interest rates and a reversal of quantitative tightening, it’s challenging to envision a sustained rally. The catch-22 situation places the market in a delicate balance, where a correction seems necessary before a more sustainable upswing can occur.
In terms of growth, the forecasts are modest. The S&P 500’s earnings growth is pegged at a conservative 2–3%, reflecting a broader sentiment that while the market has recovered some ground, the pace of growth is not as robust as investors might have hoped.
S&P 500 2024
Internationally, the outlook is mixed. The UK’s equity market is receiving a more optimistic appraisal due to significant valuation support, while Japan is considered attractive due to its supportive policy backdrop and strong balance sheets. Emerging markets, however, face a bumpier start, contending with high rates and geopolitical developments that could hinder their attractiveness.
As the year progresses, investors are advised to stay current with industry news and market views, keeping a close eye on global economic forecasts, which suggest that while a near-term recession may be avoided, the end of global expansion could be on the horizon by mid-2025. In such an environment, strategic allocation, vigilant portfolio management, and a keen eye on geopolitical and economic indicators will be essential for navigating the stock market’s latest trends.
GDP Growth Forecast
The global GDP growth for 2024 is expected to moderate, with projections suggesting a diverse economic landscape influenced by various factors such as inflation, policy rates, and geopolitical events.
According to the International Monetary Fund (IMF), global growth is forecasted at 3.1 percent for 2024, a slight increase from previous estimates, reflecting resilience in the United States and several large emerging market and developing economies. This forecast is still below the historical average of 3.8 percent from 2000 to 2019. The IMF also anticipates a reduction in global headline inflation to 5.8 percent in 2024 and further down to 4.4 percent in 2025. These changes are supported by easing supply-side issues and restrictive monetary policies. The IMF suggests that with these developments, the risk of a hard landing for the global economy has receded, and the risks to global growth are now broadly balanced.
S&P Global offers a similar view, predicting a slowdown in growth for North America and Western Europe as central banks aim to bring inflation to target rates. Global annual real GDP is expected to grow at a rate of 2.3% in 2024, with Asia Pacific’s strength helping to prevent a global hard landing. Notably, mainland China’s economy is expected to recover slowly, with growth projected at 4.7% in 2024, supported by policy easing and an improvement in the housing market. Moreover, advanced economies are expected to begin cutting policy rates from mid-2024 as inflation concerns subside.
The United Nations’ analysis also indicates a slowing global economic growth, projected to decrease from an estimated 2.7 percent in 2023 to 2.4 percent in 2024. This forecast is based on the performance of the global economy in 2023 which was stronger than expected. However, the UN anticipates that growth will still trend below the pre-pandemic growth rate of 3.0 percent.
These forecasts highlight a global economy grappling with the aftermath of inflationary pressures and the ongoing impact of geopolitical tensions. While growth is expected to continue, it will likely do so at a slower pace as the world economy navigates through the complexities of monetary policies and external economic influences.
The overarching narrative for 2024 is one of caution and preparedness. Investors are watching the landscape evolve, ready to adapt to the challenges that lie ahead in a market that promises as much uncertainty as it does potential.
Author Profile
- Lucy Walker covers finance, health and beauty since 2014. She has been writing for various online publications.
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