- A spin on the 12 days of Christmas song; a 2024 wish list.
- Housing inventories to rise.
- Five golden rings!
- A rally beyond the Magnificent 7!
- 12 months of no rate hikes.
As we look to close out what has been a good year for investors regarding performance and we make the mad rush through the holiday shopping season, we wanted to offer our wish list for 2024. In this weekly, we offer our traditional spin on the 12 days of Christmas song with some things we are hopeful for in the year ahead. We admit some of these are just wishful thinking (and highly unlikely) but in the spirit of the holidays it never hurts to wish!
- First day of Christmas: The housing market has been paralyzed this year because of high mortgage rates, elevated prices as well as low inventories. We are wishing for one million more homes to come to the market. That would bring the current inventory of existing homes for sale (1.15 million) close to its historical average (2.26 million).
- Second day of Christmas: The Fed has been working aggressively to meet their inflation goal. We hope for 2% core inflation next year so the Fed can declare victory in the most aggressive inflation fight since the 1970s/1980s. With core PCE growing 3.5% (YoY) and the labor market still strong, this looks unlikely, but we can always wish!
- Third day of Christmas: The fiscal situation in the U.S. continues to deteriorate. The budget deficit is ~6% of GDP. We wish for a deficit that is 3% of GDP which would be close to the historical average.
- Fourth day of Christmas: The aggressive tightening cycle and tight lending conditions at banks has resulted in bankruptcies soaring this year. While the speculative grade default rate remains relatively low (~3%), we are hoping we only see that rise to 4% next year instead of the expectation of ~5%.
- Fifth day of Christmas: Gold prices hit a record high last week. Who wouldn’t want five golden rings at $2072/oz.
- Sixth day of Christmas: The 30-year mortgage rate hit a 23 year high this year (7.9%). We wish for a drop to 6% in 2024. While it isn’t the low we saw in the aftermath of the pandemic, it could save a homeowner with a $350K mortgage ~$300 a month.
- Seventh day of Christmas: The equity rally in 2023 has been concentrated in a select few names. In 2024, we are hoping the rally spreads beyond the Magnificent 7!*
- Eighth day of Christmas: We wish for an eighty cent drop in the price of a gallon of gasoline. This would bring it to the average in the five years leading up to the pandemic.
- Ninth day of Christmas: Roughly 20% of U.S. office space is vacant. We wish for 900 million square feet of office space to be leased. This would be almost all of the 962 million vacant space available now.
- Tenth day of Christmas: International stocks have lagged the U.S. rally this year by over 1300 bps. We hope for a 10% rally in the MSCI AC World in 2024 which would benefit those well diversified portfolios.
- Eleventh day of Christmas: While it is wishful thinking, we are hoping for 11% earnings growth for the S&P 500 in 2024. This is the current estimate but may be overly optimistic.
- Twelfth day of Christmas: With the Fed likely on hold at their upcoming meeting. We are wishing for 12 months of no rate hikes in 2024. This would insinuate the fight against inflation has been won!
© 2023 Authored by Megan Horneman, Chief Investment Officer, Verdence Capital Advisors, LLC. Reproduction without permission is not permitted. The indexes presented are unmanaged portfolios of specified securities and do not reflect any initial or ongoing expenses nor can it be invested in directly. An investment’s portfolio may differ significantly from the securities in the index. Past performance is not indicative of future returns.
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