Three key issues are impacting the market in 2024: the election, interest rate changes and military campaigns throughout the world.
Are any of us ready for another presidential election? I am not even referring to the candidates. I am referring to the election itself, the campaigning and the aftermath. What impact will the uncertainty have leading up to the election and what impact will the ultimate winner have on the market directly after election night?
The S&P 500’s record during U.S. presidential elections suggests investors could experience a decrease in returns but still earn positive results. Since 1952, the S&P has averaged a 7% gain during presidential election years while it has averaged 17% during the year prior. Similar returns are experienced for presidents seeking re-election. Every president who has avoided a recession two years prior to re-election went on to win, and every president who had a recession within the previous two years before re-election went on to lose. Although the chances of a recession have fallen in recent months, the New York Federal Reserve’s recession probability model suggests there is still a 51.8% chance of a recession in the next 12 months. The Fed forecasts the unemployment rate will increase from 3.7% to 4.1% in 2024. These facts will influence the election and are going to dramatically impact the market.
In addition to the election, changes to interest rates will have an impact in 2024. The Federal Reserve held interest rates steady at its last meeting in 2023, yet we saw rates climb to their highest levels in over 22 years in 2023. They have indicated that three cuts are coming in 2024. Some analysts are expecting up to six cuts in 2024! The goal here is to keep inflation low while keeping rates as low as possible as well.
The important factor in all of this is the impact rates have on small to midsize banks. I have been watching this topic closely. In 2008, we experienced what problems can arise from a faltering banking industry. Will we have more Silicon Valley Bank situations in 2024? The Fed’s ability to lower rates and keep the economy steady is perhaps the most important storyline to follow in 2024.
Finally, military threats could impact our economy in the coming year. Since the beginning of the war in Ukraine, the U.S. has allocated over $100 billion in aid. Can the U.S. sustain this kind of support with the state of our current national debt? The ongoing war between Israel and Palestine now poses threats to commercial shipping and the global economy. Does China take this opportunity to take over Taiwan while the U.S. is preoccupied with Ukraine and Israel? The most important thing all of us can do to help alleviate these concerns is to vote.
Risk disclosure: Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision.
For illustrative use only.
Jason LaBarge, financial advisor and president of LaBarge Financial
7 Riggs Avenue, Severna Park, MD 21146 443-647-4321
Securities offered only by duly registered individuals through Madison Avenue Securities LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management LLC (AEWM), a registered investment advisor. MAS and LaBarge Financial are not affiliated entities.
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