Here's what you need to keep an eye on in the 2024 market
2023 has brought about stellar returns for the equity markets, with S&P 500 increasing 24.2%, the Dow Jones Industrial Average finished the year with more than a 13% gain while the MSCI ACWI, the benchmark index for world equities returned about 20% in 2023.
For 2024, the economic and market outlook is mixed and varied, with some analysts forecasting a long-awaited recession due to the higher for longer interest rate environment, while others predicting the continuation of a market rally owing to the lessened inflation fears and potential rate cuts.
In light of these uncertainties, understanding 60 years of market cycles is enlightening.
Using First Trust data, here's a concise look:
📈 Bull Market: +151.6% avg. return over 51.0 months
📉 Bear Market: -34.2% avg. return over 11.1 months
(*Data as of Sept 29, 2023)
Historically, bear markets are briefer than bull markets. Longest bears (1970s, 1980s) were linked to inflation, while the 1990s saw the longest bull.Post-2008, an 11-year bull run featured low interest rates and big tech dominance. Market peaks often precede recessions.
Despite periodic uncertainties, the S&P 500's historical resilience, averaging +11.5% returns per annum since 1928, highlights the enduring nature of market appreciation in net returns and duration.
Practical advice for 2024:
Don’t chase the market: Avoid chasing the rally by taking unnecessary risk. Check your risk tolerance, time horizon and current liquidity needs to ascertain the type of risk to take.
Stay the Course: History has shown that time in the market is a bigger determinant of returns than timing the market. Stay the course, especially if your investment time horizon is more than 5 years.
Sectoral diversification: Tech and real estate during upswings; consumer staples during downturns. Consider investing in structural megatrends like sustainable energy, artificial intelligence etc.
Asset class diversification: Include bonds for stability and diversify globally for lower correlation and provide a favourable risk-return payoff.
Do take note that investment returns are not guaranteed and it will be best to check with your financial adviser on what best suits your unique circumstances.
