Why 2024 Is The Year Of More

More *what* is the burning question...

Author

Tim Vollans
January 08, 2024 • Estimated Reading Time: 4 minutes

Fink is BACK and ready for MORE in 2024.

The major question boggling everyone’s minds is more what…

More uncertainty?

Yes. That’s guaranteed.

The only thing more certain than uncertainty is death taxes.

It’s also one of the worst environments for markets. Exhausting.

So, uh. Get your rest, anon.

We strongly suspect this will be a major theme for 2024.

False certainty followed by forced humility.

Should be fun, right?

Already in 2024, we’ve priced out some of the rate cuts that were only just priced in at the end of last year.

We’ve had the US labour market report. Which was good, but actually not so good…

If you trust the headline numbers, then it was better than expectations.

As long as you ignore the downward revision of 71k from the prior two reports.

If you want to get super doomsday, you can focus on 1.5 million people dropping out of full time employment (according to the household survey).

If you want to be less doomsday, you look at the initial & continuing claims data and ask why those 1.5 million people didn’t show up anywhere…

If you’re a Finker, you don’t trust that survey data is ‘the truth’ & take a broader view that the labour market is slowing right down but still just about fine.

And as long as Americans have jobs they spend money.

Will that continue?

Should we pretend to be certain and say yes?

Or think about it another way… If companies generally continue to see input costs falling and/or coming under control, why would they feel the pressure to lay off a load of staff?

And if those same companies believe that better times are ahead (lower inflation, lower interest rates), the same question applies.

As for what the Fed will do, this is a strong base case:

Where does this leave the Fed? Essentially where it has been. They have long internalized the view that inflation is heading back to 2% and that the economy is short-term capable of higher growth without triggering inflation.

Given that recession is not an option, they are fully willing to let inflation run in the 3s this year, hiking only if inflation pushes back up over 4%.

The current funds rate is here to stay, and they still have 100BP of cuts in their back pocket – assuming inflation is now anchored to 3% rather than 4%.

If one feels certain that core inflation is back to 3% or less, the funds rate is too restrictive. Reminded that employment is a lagging indicator, the Fed is still inclined to cut in Mar.

Steven Blitz - TS Lombard

All sounds very reasonable, but there’s huge capacity for chaos, even before we get to the US election in November (and a prospective return for Captain Chaos himself?)

Few expected him to win the first time…

Whatever happens, this year’s set up beautifully for plenty of uncertainty & volatility. Conditions that should yield plenty of opportunities….