While not always spectacular, 2023 will arguably be looked back as one of the more interesting years in economic history. High inflation dogged the global economy throughout the year, and with that came the hiking of central bank interest rates, which are usually the enemy of stock investors. We were told a global recession would come; it didn’t. We were also told that stock markets would crash; they most certainly did not. In Australia, the AU200 has powered through November and December towards annual highs as investors look forward to 2024 with much more confidence.
It has, as we said, been interesting. By and large, central banks across the globe have engineered soft landings, with most major economies not experiencing the expected recession. In the United States, which remains the engine of the global economy, the FED has almost guided inflation down to the desired 2% figure without damaging the economy in the process. Although, it is clear the job is not yet done.
Yet, for both investors and traders, caution is warranted in 2024 and beyond. Despite the fact that stocks have shrugged off inflation, headwinds are gathering. A global recession might not happen, of course. But even if it does, traders can still make a profit. Most online trading strategies take into account the markets going down as well as up, and experienced traders can swing both ways. Yet, most of us appreciate that good economic conditions are best for all.
Whether you are a retail investor, swing trader, or experienced scalper, these are five of the big issues that you need to consider in 2024:
The Housing Market Collapse May Only Be Delayed
In Australia, interest rates rose throughout 2023 – although the RBA did pause its hikes in December – and that’s been hitting mortgage holders in the pocket. Australia isn’t unique, of course, and a similar story is being told in nearly every advanced democracy. Millions upon millions of mortgage deals will expire in 2024, and homeowners will face the prospect of taking new deals at much higher rates. The knock-on effect on home sales, then, ultimately construction, could cause significant contagion in a similar manner to the Great Recession of 2008. And finally, there is the ticking timebomb of the real estate crisis in China. The warning signs are there.
Bots Can Only Do So Much
Prediction: You will be inundated with advertisements for trading bots in the coming years, many of which will be powered by AI. To an extent, this has already begun and will increase in 2024. The problem, however, is that there are limitations to what bots can do. Sure, they might be able to analyze the market and execute with better timing than humans, but trading is often considered as PVP (player versus player). If millions of trading bots are shorting the market, then that’s going to end up messy. In the end, trading is often about taking a contrarian view based on intuition and experience. Bots can only mimic a small part of that. While you should not ignore new financial trading technology, it’s best to be somewhat sceptical about fully trusting bots – at least for the moment.
Elections Could Lead to Huge Volatility
2024 is deemed to be the most historic year ever for general elections. Why? Citizens in over 50 countries will go to the polls next year. This includes India, Indonesia, Brazil, the UK, and the United States. It is the latter, of course, that will be the most influential in shaping the global economy. The consensus is that the likely Republican candidate, Donald Trump, is better for financial markets than the incumbent, Joe Biden. However, as the polls ebb and flow, you might see volatility across various asset classes, notably stocks and US dollar forex pairs.
Crypto Is Bouncing Back, But For How Long?
Over the last decade, no asset class has offered more opportunity to traders and investors than crypto. Digital currencies have been on a tear in the final quarter of 2023, and there is a sense of euphoria among holders who believe that 2024 is going to deliver the biggest-ever bull market. There are tangible reasons to believe this, including the prospect of institutional investment and the Bitcoin halving (a change in the protocol where miners receive fewer BTC, creating less supply pressure on exchanges). But crypto has not yet been tested in a true global recession. If it comes, the normal rules of the four-year cycle that everyone is counting on may not apply.
The Global Debt Crisis is Largely Being Ignored
While some countries, notably Australia, have a healthy debt-to-GDP ratio, they are technically outliers. Global debt has now exceeded $300 trillion. It’s an unfathomable figure, equal to over $37,500 of debt for every person on the planet. Now, it’s not certain that this all comes to a head in 2024, but it does feel like a balloon that is going to pop at some point. Global institutions are sounding warning bells about this “crisis”, and it’s largely being ignored by politicians and the financial media, with some exceptions. Nonetheless, if that balloon bursts, with high interest rates acting as the pin, traders must be aware that it will impact everything from gold to forex to bitcoin to stocks to bonds.
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