2024 Year Ahead: A Global Summary
Also: Monty’s Personal Notes and Strategy For the Coming Year
The discussion surrounding the economic outlook for 2024 is multifaceted, with various factors influencing the global and United States economies. We are maintaining a bullish stance for 2024, despite potential slowdowns in global growth, particularly in China. Alongside China, Russia and several global commodity producers might experience a deceleration from their 2023 performance. Despite these challenges, the global economy is expected to grow, with significant contributions from the United States, India, Japan, and other Asian manufacturing hubs such as Taiwan, Thailand, Singapore, South Korea, and potentially Indonesia. Additionally, Mexico and other countries benefiting from nearshoring will likely see growth as they develop supply lines closer to the United States and Europe.
One major concern on the horizon is the potential escalation of conflict in the Middle East. The ongoing war in Ukraine appears to be at a stalemate, and we anticipate little change in this situation through 2024. Europe, meanwhile, has seen its growth stunted, partly due to hasty decisions in its transition to green energy, which has compromised its economic expansion and self-reliance. This transition, particularly the move away from alternatives like uranium and a zero fossil fuels policy, has significant implications. Europe’s military readiness is also a concern, as it is currently below safe levels.
In the Middle East, we do not foresee a significant escalation involving Hezbollah in the conflict, as it would be strategically unwise for them to risk a U.S.-supported Israeli response that could threaten their power in Lebanon. However, if Iran becomes more actively engaged with Israel and the U.S., or if Israel targets Iran’s nuclear sites, this could escalate the conflict and impact the markets. We expect the Israeli conflict with Hamas to continue, with Hamas being driven underground for a few years. Hezbollah is likely to maintain control in Lebanon, with countries like Saudi Arabia, the Arab Emirates, Jordan, and Egypt gravitating towards the U.S. economic sphere. These nations, wary of Iran, are more inclined to align with Western powers and Israel. Saudi Arabia is expected to lead these moderate, wealthy states with non-aggressive foreign policies, positioning themselves in opposition to Russia, China, Iran, and other authoritarian regimes. Caveat: we approach these issues from an economic perspective, seeking to understand the rational self-interest of ruling elites if we can; but the amount of duplicity, dishonesty, and skullduggery in the way foreign policy is conducted in authoritarian countries makes confident prediction of behavior impossible.
Economic growth will be driven by technological leaders in the semiconductor industry, including Taiwan, South Korea, India, the U.S., and some major European manufacturers. Software development will be spearheaded by the U.S., Japan, India, Taiwan, some European countries, Israel, and Eastern Europe. The pharmaceutical and medical sectors will be led by major drug companies in Japan, Europe, and the U.S. Consumer products will see a diverse range of contributors from various global regions, spanning high-end, mid-priced, and budget segments.
Concerns about a potential world banking crisis in 2024 stem from previous imbalances caused by real estate speculation and mismanagement, as seen in incidents like the Silicon Valley Bank collapse. However, the swift response to these challenges has helped stabilize the situation. Moving forward, there will be increased scrutiny and monitoring by Federal regulators, who aim to act more decisively and effectively in overseeing banking risks, addressing shortcomings in their previous approaches.
Due to the disruptive actions of the Houthi rebels, who are Iranian proxies, shipping in the Red Sea has been significantly affected; their aggressive behavior has become a major issue for Saudi Arabia, leading to attacks on maritime vessels in this region. Consequently, almost all transportation through the Red Sea has ceased, primarily because insurance companies are unwilling to cover these risks. This cessation has a ripple effect on global oil transportation, particularly routes that navigate around the Horn of Africa, resulting in a 40% increase in transportation costs. This, in turn, contributes to a 15–20% rise in the price of oil in numerous locations.
These developments are likely to trigger a short-term surge in oil prices as long as the Houthis maintain their current course of action. It appears that the Houthis, along with other Iranian proxies, including Hezbollah and Hamas, strategically intensify these disruptions whenever Saudi Arabia and other nations appear to be forming closer ties with Israel. Their aim seems to be to sow discord between the Arab world, Israel, and Western countries. As long as these disturbances persist, it is expected that oil prices will continue to increase.
We note that mid-size producer Angola’s departure from OPEC acts as a slight headwind to the oil price insofar as it calls OPEC’s stability into question; it accounts for about 3.9% of current total daily production. We further note that in the last quarter of 2023, the United States will have had higher daily production -- about 13.3 million barrels per day -- than any country in history, led by shale oil drillers in Texas and New Mexico’s Permian Basin
In this context, oil is viewed more as a trading commodity rather than a long-term investment. With oil prices exceeding $80 per barrel, in our view it becomes a compelling opportunity for sale.
2024: Monty’s Personal Notes
“Here’s how I intend to position myself for the beginning of 2024. Caveat: this view is dynamic and subject to revision at any time!
“In my investment outlook for 2024, I have identified specific countries and sectors that present promising opportunities, alongside some areas to avoid.
“Starting with the United States, the focus will be on sectors that are likely to benefit from advancements in technology and artificial intelligence, as well as the energy sector. A few quality banks and financial institutions also appear to be favorable options. However, I plan to steer clear of consumer stocks and utilities, as these sectors may not offer the same level of growth potential.
“In Japan, the emphasis will be on consumer technology manufacturers, and the semiconductor industry. These sectors are poised to capitalize on Japan’s technological prowess and financial stability.
“Turning to India, I am particularly optimistic about the prospects of growth stocks. I plan to allocate about 6% of my portfolio to an India growth stock ETF, GLIN. This market presents an opportunity to over-own, given its potential for substantial growth.
“South Korea’s semiconductor industry is also on the radar. The issues of oversupply within this sector seem to have been resolved, signaling a potential uptick in the market.
“Indonesia represents a broader market participation opportunity. The country’s diverse economic landscape offers a range of investment possibilities.
“Regarding the S&P 500, I believe corporate profits could surpass $240 per share in 2024. This could propel the S&P 500 to close around 5,400 by the end of the year.
“I expect volatility throughout the year in both directions. However, my projection for the SPDR S&P 500 ETF Trust (SPY) is an increase of 12–13% at its peak in 2024. Notably, this high could occur at any point during the year, not necessarily at the end.
“A key factor will be the profitability of earnings, which I anticipate will significantly increase in 2024. This increase will likely be driven by stable interest rates and government spending influenced by the election cycle.
“I anticipate a positive market rally if the Republicans secure the presidency and gain control of at least one house of Congress. This potential political shift could provide a conducive environment for market growth.
“My investment outlook for 2024 is anchored on a few key themes, notably the expectation of over 10% growth in U.S. corporate profits. This optimistic view is coupled with a projection of moderate inflation and a slight decrease in interest rates, potentially ranging from 3.5% to 4% for the 10-year Treasury by December 2024.
“In terms of my investment strategy, the SPDR S&P 500 ETF Trust (SPY) will constitute a significant portion of my portfolio. I anticipate that SPY will perform well, particularly if there’s a rally in the financial and industrial sectors. Additionally, to leverage this potential growth, I plan to include technology stocks in my portfolio.
“Regarding other major positions, I intend to invest in a diverse range of assets, including:
Grayscale Bitcoin Trust (GBTC)
NVIDIA Corporation (NVDA)
Eli Lilly and Company (LLY)
Novo Nordisk A/S (NVO)
Microsoft Corporation (MSFT)
Meta Platforms, Inc. (META)
Alphabet Inc. (GOOGL)
Large-cap stocks in Japan (EWJ ETF)
Growth stocks in India (GLIN ETF)
Sprott Physical Gold Trust (PHYS)
“For a trade rather than as an investment, I intend to hold the Sprott Physical Uranium Trust (SRUUF), and an instrument for exposure to the spot price of oil such as the ProShares K-1 Free Crude Oil Strategy (OILK). In my view, oil is a sale at $80 per barrel or slightly above.
“My strategy involves starting the year with 70% market exposure. I anticipate a period of market weakness, particularly between April and June, during which I plan to increase my investments, potentially up to a full 100% allocation.
“From a personal perspective, I see commodities experiencing a marginal increase, but not a significant surge. Gold and Bitcoin can both rise in 2024. I favor physical gold for a small position in the portfolio, and I will avoid gold mining stocks, which have suffered under the rising cost of energy, labor, materials, and debt.
“Inflation will slowly moderate in 2024. Treasury bills have been a mainstay of portfolios in 2023; 2024 will bring one-year interest rates down below 5%. I anticipate something around 4% for one-year T bills in late 2024. Therefore T-bills will underperform stocks in 2024 -- especially if an investor uses market pullbacks to buy stocks.
“This view is influenced by the moderating inflation and the current global political climate, where more conservative governments are being elected in various regions (including Europe and Latin America).
“Additionally, I observe a trend where U.S. universities, particularly Ivy League institutions, are likely to face regulatory constraints imposed by the U.S. Congress. This trend is not limited to the U.S., but is evident globally, as governments worldwide are starting to work to assure freedom of speech at academic institutions. This shift is partly in response to the influence of leftist intellectuals, particularly those rooted in the tradition of the Frankfurt School, among university faculties, which has become a notable factor in educational governance.
“My projection that the U.S. dollar will experience a decline of about 4% in the coming year compared to various global currencies. While this anticipated decrease is not substantial enough to justify taking a position to short the dollar, it does suggest a more optimistic outlook for the currencies of several countries. Specifically, I foresee a brighter future for the currencies of India, Indonesia, South Korea, and the euro in Europe. My expectation is that these currencies will either experience a smaller decline compared to the dollar than in typical years, or they might even show a modest increase relative to the dollar in 2024. However, I maintain a bearish stance on the Chinese currency.”
Thanks to Monty for these comments. Thanks to you for listening; we welcome your calls and questions, and hope you enjoy a happy and peaceful holiday.
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