The year 2024 is expected to see a significant impact on the stock market, with monetary policy being a key determinant. Central banks have been navigating through uncertain territory since the onset of the Covid pandemic and are closely watched by professional investors. According to a survey conducted by Bank of America, 52 percent of investment fund managers believe that the Fed will have the greatest impact on stock prices in 2024, as opposed to only 33 percent who feel that company profits will be the main driver of prices.
John Plassard, an investment specialist at Bank Mirabaud, also sees wrong monetary policy decisions as the biggest risk for financial markets. The Fed’s handling of inflation has been a point of contention, with initial assessments of inflation being deemed “temporary” leading to subsequent interest rate hikes. However, despite these uncertainties, some investment experts are even considering the possibility of a take-off scenario where economic growth picks up again despite ongoing monetary policy interventions.
Fed Chairman Jerome Powell has emphasized the need for convincing evidence before considering further interest rate hikes, indicating a cautious approach to monetary policy. Looking ahead to the rest of 2024, national elections taking place in over 40 countries with a combined population of over 3 billion people could have a significant impact on market dynamics. Despite these uncertainties, investors are advised not to be overly risk-averse and American stocks are particularly expected to perform well in this environment.
Overall, monetary policy is expected to play a crucial role in shaping stock prices in 2024. As central banks continue to navigate through uncertain territory and make decisions based on limited data post-Covid, it will be important for investors to stay informed and cautious when making investment decisions.