Week in the markets: where next in 2024?

As Black Friday passes and the earnings calendar slows down in the run up to Christmas, investors start to think about what next year holds in store. As ever, there are no easy answers. 

Back to the future 

The recent rally in stock markets has taken investors back close to the July peak. Last week’s reduced trading ahead of the Thanksgiving break delivered a fourth consecutive rise for the S&P 500 and the index is now within a whisker of its high point at the start of 2022. It looks increasingly like the October low last year was a sustainable bottom for investors. What is less clear is what 2024 will bring. 

Beyond the Magnificent Seven, it’s been a period of drift for markets as investors weigh up the good news of a likely peak in interest rates with the bad news of a potential recession next year. This kind of consolidation is not that unusual and tends to lead to further gains for investors for the simple reason that markets rise around two thirds of the time. Whether this is what happens in the months ahead depends to a large extent on whether next year turns out to be a year of recession or a soft landing for the economy. 

That in turn depends on whether central banks have judged their recent monetary tightening cycle correctly, raising rates just enough to quell inflation while avoiding pushing the economy into recession. 

As market watchers put their forecasts for 2024 together a consensus is building that it could be a reasonable year for shares if there is indeed a soft landing and perhaps a slightly better one for bonds if interest rates do start to come down in the middle of next year. Cash is likely to remain attractive for the foreseeable future, offering a risk-free yield of between 4-5%. Other reliable sources of income like commercial property could have a better year, having already corrected sharply in the past couple of years. 

Commodities in focus

The outlook for key commodities is less clear. Gold in particular is undergoing a two-way pull. It tends to be less attractive to investors in a period of high interest rates because it pays no income and so looks relatively unappealing when a decent yield is available from other less volatile investments like bonds and cash. But at the same time, the precious metal has safe haven appeal at a time of geo-political uncertainty, and it tends to be boosted by a falling dollar, which makes gold cheaper to investors using other currencies. This week gold hit a new six-month high above $2,000 an ounce. 

Meanwhile, oil is heading the other way, impacted by an easing of tensions in the Middle East as the risk of a regional extension of the Israel/Gaza war reduces and amid concerns about a slowing global economy. Oil has fallen back below $80 a barrel at which level it represents a much lower threat to global growth and inflation.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.