After the record year of 2023, stock investors should now prepare for a difficult year. At least that’s what Ron William, market strategist and founder of RW Advisory, warns about, who expects a “year of non-consensus”.
• Market participants expect up to six interest rate cuts in 2024
• Market strategist Ron William still expects a difficult year for stocks
• Positive dynamics of possible interest rate cuts could already be priced in
Last year, the S&P 500, which reflects the broad US stock market, rose more than 24 percent. The most important driver here was the hope that the US Federal Reserve Bank would finally initiate a turnaround in interest rates in the new year and significantly reduce interest rates again. The monetary authorities themselves have signaled at least three interest rate cuts for 2024, but market participants consider this to be a conservative estimate and are more likely to expect up to six cuts.
Difficult year for stocks
Still, stocks could have a difficult year ahead. Because “my work is that we continue to be in a late cycle, so from a macroeconomic perspective the market is more dependent on growth numbers than on the excessive valuations that the market has been betting on,” explained Ron William, market strategist and founder of RW Advisory, to the US broadcaster “CNBC”. The macroeconomic, fundamental and technical components of an analysis by his consulting firm would point to medium risk aversion in US stocks, the technical strategist said.
In this context, he referred to “extremely overbought conditions reinforced by record short selling” as well as recent high investments in smaller capitalization and lower quality stocks. William argued that all of this “leaves the already tight rotation further vulnerable, along with economically sensitive stocks that will feel the pressure as the Fed potentially cuts rates, but also especially as we continue to be in a late cycle phase.” which could disappoint downward growth”.
Rising bond yields expected
The technical strategist believes that the stock and bond markets will experience a “year of non-consensus” in 2024. So he believes that, although markets are pricing in up to six interest rate cuts by the US Federal Reserve this year, bond yields will reach and exceed the five percent mark again in the long term. “We’ve seen big swings, but the trend is still upward,” William said.
According to the strategist, the weakening of interest rates and the rally in stocks over the last two months indicate that much of the positive momentum from potential interest rate cuts has already been priced in. This means the market could be ahead of its time when it comes to future rate cuts.
“We also need to consider a possible monetary policy error, which the market so far believes does not exist, as well as the soft landing narrative that remains strong. Part of tactical behavioral analysis is to look for such turning points “and I think this year could be the year of non-consensual movements,” William explained.
Optimism for gold
Meanwhile, the prospects for gold are good in the current environment. As geopolitical tensions increase in 2024, William believes safe havens will remain in demand. That’s why he sees the price of gold breaking above the $2,700 mark by the end of the year.
Editorial team finanzen.net