Generally, markets are expected to be volatile during the first half of the year, which is not necessarily bad news for investors.

The S&P 500 alone generated a 26.29% total return in 2023. Economists are optimistic that 2024 will be a repeat of 2023’s rally and could see the S&P 500 at an all-time high.  

Despite ongoing concerns about inflation, interest rates, debt levels and political dysfunction in Washington, D.C., investors are optimistic that the Federal Reserve will achieve a soft landing for the U.S. economy and soon pivot from interest rate hikes to rate cuts.

Falling interest rates and earnings growth could be a bullish combination for stocks. However, some analysts are concerned about bloated valuations in the technology sector, and the 2024 U.S. presidential election could create significant market volatility.

Last year’s winners, the big 7 AI companies, despite a possible market correction, are still investors’ stock of choice. And although they might not peak at last year’s skyrocket prices, they are still expected to do well this year. Even though AI stock might be overinflated, do not forget that the Big 7 are formidable, robust companies with a history of good growth.

James Demmert, CIO at Main Street Research, says, “The market’s recent strength is indicative of a new and very real AI-led bull market and business cycle that could last a decade thanks to the productivity growth and tailwinds from AI. Experienced investors know that this kind of broad-based strength across all sectors and capitalisations is reminiscent of the first year of previous bull markets with much further to run, with inevitable corrections along the way.”

The FED succeeded in bringing down inflation in 2023. For 2024, it is predicted to be 2.4%, with three possible rate cuts during the year. There is still the threat of a recession if the FED’s policy tightening becomes too extreme.

Let’s not forget that it is an election year with 40 global elections that could wreak havoc on international markets. Historically, election years do not produce very high returns.

With all the uncertainty and yo-yo predictions for the markets in 2024, it is prudent to consult with a financial advisor to ensure that investment portfolios are suitably diversified to mitigate possible risks.