Wishing you a joyful New Year filled with laughter, love, and unforgettable moments, surrounded by cherished family and friends. May the 2024 bring similar gains as in 2023!
I had great 2 weeks break with travels to Turkey with family and then solo trip to Palm Springs. Both places are amazing and definitely worth a visit if you get chance.
Talking about gains in 2023 - Here is recap of 2023..
- Inflation fallen below 4% and heading towards 3%
- Unemployment firmly below 4%
- Real wages growing above 4%
- GDP growth around 3%
- Markets: S&P notching one of the best year with 24% gains while Nasdaq doing even better with 40% gains thanks to Magnificent-7 (or TAMMANNA) many of which had triple digit gains
- My personal recommendations did exceptionally well - many of which were up by high double digits (e.g. INTC) and some of them had triple digit gains (e.g. META)
All in all - 2023 was great year.
As calendar changed to 2024, what's in store for new year? This is election year in many countries - most importantly in India and USA. So I am going to start making some macro level predictions followed by some recommendations for 2024.
Geo-political:
- India voters will give historic 3rd term to Modiji and his government. After all, he is the most popular and charismatic world leader and tirelessly working to make sure that India in on trajectory to become developed nation by 2047. The level of energy, passion, creativity he demonstrates even at age 73 is unmatched. "Modi ki Guarantee" has become a slogan by itself and will propel his party BJP to historic win. Indian voters have a clear choice and looks like they have already made their mind (looking at results from "semifinal" of state elections)
- Elections in USA is another story....no one likes the two likely choices (even their own party members). But unless there are legal or health curve-balls, we are going to have rematch between Biden and Trump. And given that Americans like status quo (especially when alternative is unpredictable), Biden will win presidential election in Nov 2024
- UK elections - most likely to happen in late 2024. Rishi Sunak is trying his best to change the fortunes of his party but UK voters may prefer change in government and bring labor party back to power
- Wars - Israel/Hamas war will have some kind of cease-fire. While there is danger of expanding middle-east war, every effort would be made to avoid this and would be contained between Israel and Hamas. Russia/Ukraine war will continue in 3rd year. This is the war of attrition with no end in sight. There is chance that some level of cease-fire negotiations may start in 2024.
Economy:
- There won't be recession in 2024. Instead much-talked soft landing will happen. GDP growth will be between 1-3%
- Inflation will fall below 3% but Fed's target of 2% could still be evasive.
- Fed will cut interest rates 3 times most of which would be backloaded in 2H2024
- Unemployment will remain between 3.5 to 4.5%. Real wage growth would be around 3-4%
- Corporate earnings would be positive (high single digits)
Markets:
- Indexes would reach all time highs in 1H2024 before having minor correction in spring/summer.
- S&P would spend year between 4200-5000. It would end year closer to higher limit of the range.
- Nasdaq would end year between 16000-18000
- Rally will expand from Mag-7 to rest of S&P companies - especially into healthcare, hospitality and finance.
Sectors:
- Tech - this sector would continue to lead with AI investments moving up the stack (Semi, infrastructure, data, applications). 2023 was about semi (NVDA, AMD) and to some extent infrastructure (OpenAI, MSFT). INTC turnaround will gain momentum in 2024 and continues to be my favorite. 2024 could also be year of SAAS companies which hold data and will start providing meaningful AI outcomes. META will become trillion $ market cap company again in 2024
- Healthcare - this sector went thru post Covid pandemic hangover (MRNA and PFE took 40-50% haircuts). Health-care found its own "AI" equivalent with weight loss drugs which benefitted only two players NOVO and Eli Lily. Investors will start looking beyond these two companies. PFE and WBA (Walgreens) are two of my picks as turnaround candidates in 2024
- Finance - Markets had a scare in March 2023 due to blow-up of SVB and First republic. All regional banks took a major cut during that mini-crisis. Now that rates are coming down, regionals could start reversing their losses on book. Regional bank ETF (KRE) and XLF are good way to ride the upswing. Fin-techs would finally stop bleeding. PayPal, Square and UPST are some of the stocks to monitor
- Energy - After great 2021/2022, this sector is stuck thanks to oversupply of oil and transition to non-fossil energy. We have started seeing consolidation with major deals being announced. It's also great dividend paying sector. One can consider XLE for steady growth and low risk/reward
- Real Estate - everyone predicted gloom and doom for this sector due to high interest rates and workers not coming to office. But returns on few commercial real estate players (SLG, VNO, BXB, BDN) as well as home builders have proven them wrong. These companies would continue to recover their valuations and could reach price/book ratio between 1 to 2 (some of them are still below .75). In the meantime, they continue to pay high-dividends as required by REIT rules.
- Crypto - despite all the excitement about Bitcoin ETF, I would recommend staying away from this. It's not worth the risk.
That's all for now...2024 would be an exciting year for sure. So enjoy the ride!
/Shyam
Comments