The stock market in 2024 is expected to be heavily influenced by monetary policy, with the US Federal Reserve Bank playing a key role. Since the beginning of the Covid pandemic, central banks have had to navigate through uncertain waters, and many are still unsure about what lies ahead. The decisions made by central banks, particularly the Fed, are closely watched by professional investors, and many expect the Fed to play a significant role in shaping stock prices in the coming year.
According to a survey by Bank of America, 52% of investment fund managers believe that the Fed will have the biggest impact on stock prices in 2024, while only 33% believe that company profits will drive prices. John Plassard, an investment expert at Bank Mirabaud, also sees wrong monetary policy decisions as the current biggest risk to financial markets.
The Fed’s handling of inflation has been controversial, with initial estimates of inflation seen as “temporary” leading to subsequent interest rate hikes. Uncertainty in markets has been further exacerbated by the lack of reliable post-Covid data, making it difficult for central banks to make informed decisions. In March 2023, inflation rose to 2.7%, prompting the Fed to keep interest rates steady for now.
Despite the uncertainties surrounding monetary policy, some investment experts are even considering a scenario where economic growth picks up again despite ongoing monetary policy interventions. Fed President Jerome Powell stressed the need for convincing evidence before considering further interest rate hikes, indicating a cautious approach to monetary policy.
Looking ahead to the end of 2024, the stock market is expected to be eventful due to national elections taking place in over 40 countries with a total population of over three billion people. The implications of these elections and other geopolitical events could significantly affect market dynamics. Despite these uncertainties, investors are advised not to be overly risk-averse and instead focus on long-term strategies that take into account both risks and opportunities.
In conclusion, monetary policy is expected to have a significant impact on the stock market in 2024. While there are many uncertainties surrounding central bank decisions and their potential impact on prices, investors can still find opportunities if they remain flexible and adaptable in their investment strategies.