In the midst of a new year, the global economic climate is witnessing a number of developments that may affect events in various sectors, and financial analysts are expressing cautious optimism about the prospects of the stock market in 2024, with expectations that the markets in the new year will achieve moderate economic growth and more flexible behavior of the markets. In light of the strategic shifts towards sustainability and technical progress.
Bloomberg expects stock markets to witness another exciting year, based on the momentum of strong performance in the past year. According to the agency, the Standard & Poor’s 500 (S&P 500) index achieved high levels, after rising by 26.29% total return last year, with the possibility of achieving new record levels in 2024. He pointed out that investors, supported by optimistic expectations, are carefully monitoring economic factors. The major investments that supported the stock market’s rise in the previous year.
US stocks are moving away from pressure
Despite continuing concerns about inflation, interest rates, high debt levels, and political instability in Washington, investors’ expectations remained optimistic about the continuation of positive trends, while the US Federal Reserve (the central bank) is expected to change its tactic, after it achieved progress in controlling inflation levels in 2023. , to move to the stage of smooth decline of the American economy, avoiding the recession that was around the corner, and this means, according to Nasdaq, a rapid transition from increasing interest rates to cutting interest rates.
Nasdaq indicates that lower interest rates and earnings growth may provide a positive backdrop for stocks in 2024. Analysts the platform spoke to point to the historical pattern of bull markets for the Standard & Poor’s index, indicating that the current rise may continue in the future. CFRA investment strategist Sam Stovall notes that the average S&P bull market has created a return of approximately 157% and has lasted more than 4 years, indicating the possibility of the rally continuing for a long time.
Fog covers Europe
Standard & Poor’s Market Intelligence, which specializes in market research, recently presented its “European Market Outlook for 2024,” highlighting the main topics that may affect European markets.
The scene in 2023 was characterized by uncertainty and instability, with progress being made in reducing inflation, but recession fears looming on the horizon.
The report discussed six important themes for 2024, which are capital markets, mergers and acquisitions, artificial intelligence, sustainability, supply chains, and the energy transition.
In summary, S&P noted that its “2024 European Market Outlook” indicates a challenging landscape with economic uncertainty, with notable developments in artificial intelligence management, sustainability concerns, and shifts in supply chain dynamics and energy policies. The report stresses the need for investors to follow cautious strategies in the face of these uncertainties.
As a result, the outlook for capital markets for the year 2024 appears to be ambiguous, according to the report, with a steady increase in bankruptcies and a sharp slowdown in credit growth across most banking sectors. The report indicates that European central banks are still maintaining their tightening tendencies until they reach their highest levels. Periodicity. “Continued tightening credit conditions will help reduce inflation in 2024, but at a modest pace,” Standard & Poor’s said.
The report also stressed the large availability of liquidity in the field of mergers and acquisitions, as the total cash balance of private capital worldwide reached $2.49 trillion in mid-2023, rising more than 11% since the end of 2022.
Despite the decline in the value of deals backed by private capital, the report predicted a possible shift in the European Central Bank’s strategy to raise interest rates, indicating a turning point in the fight against inflation.
Great opportunities in the Middle East
A report from Bloomberg indicated that despite the difficult global environment for initial public offerings last year, the Middle East region has emerged as a vital center for stock exchange listings, and this trend is expected to continue until 2024.
Over the past two years, the oil-rich Middle East region has become a focal point for initial public offering activity, as governments aim to diversify their economies away from dependence on oil, by selling stakes in state-owned companies. This was especially evident as crude oil prices continued to rise. In addition, geopolitical events – such as: Russia’s exclusion from an emerging markets index and the slowdown in economic growth in China – have directed investors’ attention towards the Arabian Gulf region.
Bloomberg said that although the total funds raised through initial public offerings in the region was limited, “about $5 billion,” the Middle East is on the right track to secure third place among the best-performing years for returns from initial public offerings since 2007. It is worth noting that The Gulf region represents 45% of the total volume of IPOs in Europe, the Middle East and Africa expected in 2024, compared to 51% the previous year.
Bloomberg quoted bankers as feeling optimistic about the momentum in the initial public offerings market in the Middle East and North Africa region, and they expect continued growth driven by strong economic expansion, government reforms, and sustainable demand from investors.
Christian Caban, Head of Capital Markets for Central and Eastern Europe, the Middle East and Africa at Bank of America, said, “There are strong expectations for the performance of initial public offerings in the Middle East and North Africa region in 2024… and the latter, according to our expectations, will witness the entry of more private companies into the markets there.” .
The strong performance of IPOs in the Middle East contrasts with the lackluster global IPO market, which is heading toward its worst annual performance since 2009, according to the report. In the Middle East, stocks showed an average rise of about 40% after IPOs.
The impact of the aggression on Gaza
However, challenges remain according to Bloomberg, including geopolitical tensions. The MSCI GCC index witnessed a decline of 3.2% with the outbreak of the Israeli war on the Gaza Strip last October, which raised investor fears. However, the index rebounded by 12% as these concerns eased.
Salah Shamma, head of the Middle East and North Africa equity investment unit at Franklin Templeton Investment Group, warned: “If things escalate and the theater of operations expands, this will certainly have a detrimental impact on the risk premium and investors’ perception of the scale of risks in the region.”
Market levers…artificial intelligence and strategic directions
Predicting the future remains a major challenge in an accelerating world, but analysts expect a climate of cautious optimism in 2024, with moderate economic growth rates, indicating a move away from the strong post-pandemic recovery. However, signs of resilience and adaptability are encouraging, paving the way for strategic maneuvers from investors and companies.
According to Bloomberg, the global market is undergoing a transformation, driven by technological advances, shifting consumer trends, and a growing commitment to sustainable practices. Investors and companies are actively looking for strategies to navigate this evolving landscape and capitalize on emerging opportunities.
The control of artificial intelligence (AI) technology over the strategic plans of major technology companies stands out as the most important levers upon which optimistic New Year expectations are built, as artificial intelligence technology has driven the leading technology stocks in 2023, and Bloomberg mentions Nvidia, whose market value exceeded $1.3 trillion in record time. An example of the impact of artificial intelligence on markets, which has ignited optimism about the longevity of the expected AI-driven rally.
James Demert, head of the investment department at Main Street Research, says that the current strength of the market is evidence of the beginning of a new and real cycle supported by artificial intelligence, and an economic cycle that can last for a decade thanks to productivity growth and the tailwinds of artificial intelligence.
While optimism prevails, expectations raise concern about exaggerated estimates for the technology sector, and with the addition of the factor of the US presidential elections scheduled for 2024, cautious expectations are strengthened with some potential fluctuations according to Nasdaq, which makes market shareholders prepare for political developments and their impact on stock estimates.
The Federal Reserve and monetary policy…a delicate balance
The Federal Reserve plays a pivotal role in shaping the global economic landscape, and Nasdaq analysts point out that despite the significant progress the Fed has made in reducing inflation, the bank faces a major challenge in maintaining reasonable levels of economic stability in 2024.
According to Reuters, the personal consumption expenditures price index showed a slight decline last November, but core personal consumption expenditures, the Fed’s preferred measure of inflation, is still above the target of 3.2%.
While the Federal Open Market Committee (FOMC) forecasts a core PCE inflation of 2.4% and GDP growth of 1.4% in 2024, with expectations of only 3 interest rate cuts by the end of the year.
However, investors are more optimistic, as they expect a 70% chance of the first interest rate cut from the Federal Reserve by next March, and an 80% chance of at least five interest rate cuts by the end of 2024, according to the giant US financial services group. CME.”
