2024 Predictions: A Fool's Game

It's tough to make predictions, especially about the future(!).

As we welcomed January 2023, who could have guessed the rise of Chat GPT or the popularity of Bully XLs?

The thought of Twitter vanishing from our screens seemed unfathomable, the HS2 project was still on track, and Jon Rahm's wouldn’t consider LIV Golf, even if they offered $400m*.

Yet, some things remained predictably unchanged –no one has been sent to Rwanda, train drivers continue their strikes, and Michelle Mone still hasn’t done anything wrong.

In the financial world, the futility of predictions holds true, echoing the adage that an economist is someone who will tell you tomorrow why the things he predicted yesterday didn't happen today."

* It appears $450m was the magic number

Predictions For 2024

In a normal year making predictions is hard enough, however 2024 is set to be an electoral marathon with over 2 billons voters heading to the polls, representing more than 40% of the world’s electoral population.

Starting with Taiwan in January and ending with the grand finale of the US presidential election in November, the year will bring 40 national elections—a busy lineup even in calmer political times.

In between we have the World’s largest democracy India, Russia, South Africa and potentially the UK. Here is my chosen tri-fecta.

Russia

Predictions here might seem straightforward – little change is expected.  Although continued rumours about Putin’s ill health and alleged body doubles add an element of unpredictability to the otherwise anticipated outcome.

US

Trump has yet to win the nomination but remains the most popular candidate in Republican polls - despite his legal entanglements.  My bet?  He will win the nomination but fall short again to Biden in the battle of the grandpas, as Trump’s criminal charges and foot – in – mouth disease pick up pace towards November. At 77 and 80 respectively, perhaps more interesting will be their choices of running mate.

UK

The timing of the UK's general election is a puzzle.

A cold 2025 January campaign seems unlikely, setting the stage for a potential early May election, contingent on the budget's appeal.

Alternatively, a political shift could align the UK election with the US presidential race. If Sunak faces another parliamentary setback and loses another vote, I anticipate his resignation leading to (another) new Prime Minister and an election to tie in with the US.

The Labour Party's prospects? That's a prediction I'll hold onto until the contenders are crystal clear.

What About The Financial Indicators?

As we venture into 2024, many are curious about the future of interest rates, inflation, markets, and house prices. Let’s look at how each of these critical indicators fared in 2023 and where they might be heading.

Interest Rates

The year saw rates rise from 3% to 5.25%, a significant increase. Despite some advocating for higher rates, the majority at the last monetary committee meeting opted for stability. Looking ahead, swap rates in the money markets hint at a possible decrease to around 4% by the end of 2024.

Inflation

Starting at a high of 10.5%, inflation has eased to 4.6%. However, this doesn't imply a decrease in prices, merely a slower rate of increase. Given recent trends, we might see continued volatility in inflation rates, potentially hovering around the current level for the foreseeable future.

Markets

Equity returns have been dragged forward by the US, with the S&P 500 starting 2023 at around 3800 points and is currently 4700.

The FTSE 100 has had less of a stellar year, starting at around 7500 and currently a little over 7600.

I cover this in my article here, where US tech stocks are currently trading at a 40% premium while UK stocks are at a 40% discount.

Bond markets recovered somewhat but have yet to make back their 2022 losses. Could 2024 be the year of the bond?

The US is likely to remain nervous until the outcome of the Presidential Election. UK markets are more susceptible to economic than political news.  If there were no elections I would be tempted to say the returns will be reversed in 2024 with the UK outperforming the US. But there are, so I wont.

House Prices

The housing market has seen its first decline in over a decade, with average prices dropping by 2% compared to a 10% rise in 2022. This downturn is partly due to fewer transactions, influenced by higher interest rates. The upcoming year is crucial as many homeowners will be renewing their mortgages, particularly impacting the buy-to-let sector.

I foresee another volatile year for the housing market, with an overall national price decline, though sought-after areas might resist this trend or even see price increases.

In Conclusion

As we stand on the brink of 2024, we find ourselves in a landscape reminiscent of The Fool's journey. Upright, The Fool symbolises beginnings, innocence, spontaneity, and a free spirit – qualities that encourage us to approach the year with an open mind and a willingness to embrace new opportunities. Yet, just as The Fool in its reversed form warns of holding back, recklessness, and risk-taking, we must tread cautiously in this period of financial volatility.

This year, much like the dual nature of The Fool, is shaped by a complex tapestry of global economic factors and political events.

And as for predictions, even a fool is thought wise if they keep silent.