On Monday, the world's major stock markets in Europe, the United States, Japan, South Korea and the Asia-Pacific region were all closed for one day, and all commodity trading was halted. As the Fed signals at its December 2023 meeting that it may have finished raising interest rates, the market is increasingly concerned about risks beyond monetary policy, such as the U.S. economy and earnings outlook for listed companies, as well as the U.S. election in November 2024.
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Concern 1: When will the Fed cut interest rates?
In recent months, more and more investors have bet that the Federal Reserve will start cutting interest rates before mid-2024, and this expectation has led to a significant rally in the fourth quarter of 2023. Markets are pricing in an earlier and larger rate cut by the Fed in 2024, with traders betting on the Fed's maximum rate cut in 2024 to be around 150 basis points, double the Fed's expectations. On Wednesday local time, the Federal Reserve will release the minutes of its December 2023 interest rate meeting, which will give investors more information about the Fed's future monetary policy path.
Focus 2: The growth prospects of large U.S. technology companies
Driven by the generative AI investment boom, seven blue-chip tech stocks – Nvidia, Microsoft, Amazon, Apple, Google's parent company Alphabet, Meta and Tesla – contributed 64% to the S&P 500's rally in 2023. In 2024, can artificial intelligence technology continue to drive the growth of the stock market? And with the overall economic growth of the United States slowing down, can the technology giants maintain a good profit prospect? Some analysts believe that among the seven major technology giants in the United States, Apple currently lacks "trump card" products or technologies to increase profits.
Focus 3: U.S. election and debt pressure
Historically, presidential election years have generally been positive for the U.S. stock market. Since 1949, the S&P 500 has risen nearly 13 percent on average in an election year, and when the incumbent president is not running, the index has fallen by an average of 1.5 percent for the year. Part of the reason for the stock market's rally is that the current government usually implements new policies or tax cuts before the vote to boost the economy and market confidence. However, some analysts pointed out that although there are reasons to be bullish on U.S. stocks, the U.S. Democratic and Republican parties continue to fight, and the divergence on fiscal spending continues to intensify, and the U.S. federal government still faces the risk of "shutdown" in 2024. The ballooning debt of huge debts may weaken the credibility of US bonds, and these potential risks also require investors' attention.
Focus 4: Normalization of monetary policy by the Bank of Japan
The Nikkei 225 climbed to a 30-year high in 2023, driven by ultra-loose monetary policy and a weak yen, but Japanese equities will face challenges in early 2024 as the Bank of Japan may be on the verge of normalizing monetary policy and the multi-year negative interest rate may be exited. Economists widely predict that the Bank of Japan will raise interest rates for the first time since 2007 by April 2024. Once the Bank of Japan raises interest rates as scheduled, it may promote the return of domestic capital from overseas markets such as Europe and the United States. At the same time, the appreciation of the yen, as the first lever for investment and borrowing in the global capital market, will lead to a large number of financial institutions adjusting their asset allocation and investment portfolios. (CCTV reporter Gao Yan)
Editor: Wang Yifan