The 2024 Crystal Ball Exercise
It's that time of the year when I reveal my thoughts about what might happen in 2024. Overall, I’m more optimistic than I was this time last year. Plus poll results - readers are a bullish bunch
Programming notes: We are back to normal service next Monday, Jan 15th, with a Monday Macro that looks in more detail at what happened in 2023. The week after that, there will be just a Monday Macro letter as I’m on a business trip for a few days.
Also, I will be increasing the price for new subscribers from February 1st to £60 annually and £6 a month. So, if you haven’t already subscribed, the next few weeks might be a good time to start !!
Welcome back from the annual feast of gluttony and excessive TV consumption and of course happy new year!
I thought about resisting the urge to zap through my outlook for the year, but in the end, I gave up on that scrooge-like impulse! But I do want to preface my remarks by saying that I’m not going to come up with a zillion and one new ideas about the direction of this or that market/stock/index in todays letter. Instead, I’ll pull together thoughts that I have discussed throughout the last year and try and give some focus to the funds and stocks that I think deserve some kind of priority.
Coming up:
Why January might be another good month for equities
My asset allocation framework revisited
A quick reminder of my long thoughts on long term drivers
Big picture predictions
Nine Practical Investment Ideas
Four investment trust themes
A left-field thought - Colombia
Overall, I’m a lot more positive at the beginning of 2024 than I was at the beginning of 2023. As we’ll discuss I think there’s a good chance that the developed world economies have dodged a bullet and that a nasty recession has been avoided. I’m also not in the camp that says equities are egregiously overvalued – some are, most not – although I’m not a raging optimist either. My big message is to play it safe, be cautious, and expect some more volatility but I’m not personally tempted to sit on the sidelines in cash to see what will happen.
The fun stuff, part 1 - January 2024
Before we get to the framework that describes my thinking, let's get some fun stuff out of the way first – namely what might happen in January!
Frankly, I have no idea but if we look at the record books one is forced to conclude that January is always a bit strange in terms of market performance, as it is typically associated with a higher degree of risk-taking combined with a reversal effect.
Analysts at SocGen describe this effect as follows: “not only do lower-quality and riskier stocks tend to do well during January but the overall monthly hit rate of each strategy is more than 60% and at or above 70% when it comes to selling December’s leaders and buying the laggards using either month or beta-adjusted price returns”.
It's also worth remembering the adage that “So goes January, so goes the year”. According to S&P Dow Jones analysts that adage has been correct 70.5% of the time since 1929 (and it worked in 2023: January was up 6.18%, as the year was up 22.91%).
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