As the year 2024 approaches, monetary policy is expected to have a significant influence on the stock market. The American Federal Reserve Bank is a key determinant of this policy and its decisions are closely watched by professional investors.
During the Covid pandemic, central banks have navigated through uncertain territory with many unsure of how things would unfold in the future. This has led to some investment fund managers believing that the Fed will play a crucial role in shaping stock prices in 2024, as opposed to company profits being the main driver of prices.
One investment specialist, John Plassard at Bank Mirabaud, sees wrong monetary policy decisions as the biggest risk for financial markets. The Fed’s handling of inflation has been a point of contention with initial assessments deemed “temporary” leading to subsequent interest rate hikes. However, due to lack of reliable data post-Covid, it has been challenging for central bankers to make informed decisions on this matter. Inflation recently rose to 2.7% in March and prompted the Fed to hold interest rates steady for now.
Despite these uncertainties surrounding monetary policy, some investment experts are considering a take-off scenario where economic growth picks up again despite ongoing interventions from central banks. Fed Chairman Jerome Powell emphasizes the need for convincing evidence before considering further interest rate hikes, indicating a cautious approach to monetary policy.
Looking ahead to 2024, national elections taking place in over 40 countries with a combined population of over 3 billion people could have significant implications for market dynamics. Despite these uncertainties, investors are advised not to be overly risk-averse with American stocks particularly expected to perform well in the current environment.
