Global financial markets are set to be influenced by a cocktail of themes in the new year.
An anticipated pivot by the Federal Reserve to rate cuts, geopolitical risks and the US elections among other factors could translate to heightened volatility!
Here are 3 assets that may see big moves in 2024:
1) Will SPX500 bull party rollover into 2024?
After gaining more than 24% in 2023, things could spice up for the S&P 500 in the new year due to growing noise around the US presidential elections in November.
Based on all major polls, there is strong possibility of another standoff between Biden and Trump, with the latter currently leading taking a lead.
- A Biden victory may represent continuation of the current policy which could be welcomed by markets that lean towards stability and predictable outcomes.
- Trump’s possible victory could be accompanied by controversy with his proven protectionist trade stance straining US-China relations. However, markets may cheer a renewal of his tax-cut policies.
Beyond the US elections, look out for:
- Fed rate cuts
- AI-mania: more room to run?
- Corporate earnings supported by lower rates
Signs of cooling inflation have boosted bets around the Federal Reserve cutting rates in 2024 while optimism is growing around the US economy heading for a ‘soft landing’.
As things stand, markets are predicting that the Fed’s benchmark rates will be 150 basis points lower by end-2024.
These expectations along with the rapid growth of artificial intelligence may turbocharge tech stocks which account for roughly 29% of the S&P500 weighting.
On the flip side…
The S&P500 may struggle to push higher if US rates remains higher for longer.
Should the US economy experience a “hard landing” this could sour risk appetite, pressuring the S&P500 as a result.
Technical outlook…
The SPX500 looks to be trending higher with bulls back in control on the weekly/monthly timeframe.
- A strong close above 4819.50 could open the doors towards fresh the all-time highs
- Should prices dip back below 4600, this may trigger a selloff towards sticky monthly support around 4170.
- Below this point could encourage a further decline towards 3800 and levels not seen since October 2022 at 3600.
2) Bitcoin to $100,000 and beyond?
The Bitcoin hype could go into overdrive in 2024 amid growing expectations around the United States allowing its first spot Bitcoin ETF.
Indeed, investors are incredibly hopeful following a wave of applications from asset-management titans, such as BlackRock, coupled with the SEC’s loss in court against Grayscale rejected application.
In fact, the first batch of US spot Bitcoin ETFs are expected to be approved by January 10th according to Bloomberg Intelligence.
A spot bitcoin ETF is a big deal as it provides investors with an easier and supposedly more reliable access to the world’s largest cryptocurrency without having to purchase it directly.
Halving to turbocharge prices higher?
The so-called Bitcoin halving due in April 2024 is also seen as anther bullish catalyst.
Historically, the coin has reached new record highs after the last three halvings.
What is a halving?
Bitcoin’s halving will half the amount of tokens that miners receive as reward for their work.
- This happens every four years, in this instance miners payout will be reduced to 3.125 BTC.
- Markets usually view this event positive as it is set to further contract the supply of Bitcoin.
On the flip side…
Bitcoin may slip if the ETF approval takes longer than expected. Should the SEC decide to reject all the applications, the cryptocurrency could experience a heavy selloff.
Even if a spot Bitcoin ETF is approved, the cryptocurrency may respond in a lacklustre fashion if the ETF fails to attract inflows despite the hype.
Traders also may end up adopting a ‘buy the rumour, sell the fact’ response to Bitcoin’s halving announcement with the expected rally to new record highs being delayed.
Technical outlook…
Bitcoin is turning bullish on the weekly charts with prices respecting a weekly bullish channel.
- The next key level of interest is at $50000. Beyond this point is the all-time high just below $69,000 with a breakout above this level perhaps opening a path towards $100,000.
- Should prices slip back below $37,000, this may open the doors towards $30,000 and $20,000.
3) Gold set to deliver glittering returns?
The outlook for gold shines brights in 2024 thanks to fundamental forces but technicals could throw a wrench into the works.
After surging to a fresh all-time high at $2135 in December, gold bulls could switch things up as the Fed prepares for its first rate cut since March 2020.
Signs of cooling inflation in the United States and across the world have fuelled speculation for a global central bank pivot. This development is likely to weaken the dollar along with Treasury yields, keeping gold buoyed.
According to Fed Funds futures, the Fed is expected to cut rates as much as 150 basis points in 2024, creating an environment for gold to glitter.
Note: Gold pays no interest, so lower rates reduce the income foregone by not holding other assets.
Keep eye on geopolitical risks…
- The Russia-Ukraine war, Israel-Hamas conflict and China-Taiwan tensions may influence overall sentiment in 2024 – stimulating appetite for safe-haven assets like bullion.
On the flip side…
Gold could tumble if markets have gotten ahead of themselves in terms of US rate cut timings.
Most Fed officials have forecast that the US central bank could cut rates by 75 basis points in 2024, essentially half the 150 basis points expected by traders. This possible disconnect could spoil the party for gold bulls.
Technical outlook…
Watch out for the aggressively bearish weekly candle back in December.
- Sustained weakness below the psychological $2000 level may send prices towards $1935 and $1810 – near the low of 2023.
- Should $2000 prove to be reliable support, this may re-open the doors towards the all-time high at $2135 and beyond.
Bloomberg’s FX model currently forecasts a 77% chance that GOLD trades within the $1799.07 – $2532.49 range during Q4 of 2024.
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