Assessing the Year Ahead
February 1, 2024
Last Saturday (January 27), I attended an investment conference in Houston. The keynote speaker was Greg Valliere (“GV”). GV has been working in Washington, DC for over 30 years. He is a well-regarded strategist and commentator on the intersection of politics and investing. I first saw him on Wall Street Week with Louis Rukeyser way back in the late 1980s. He leans neither to the democrat nor republican side. As he said, “I sit on the 50-yard line, so I can see both sides of the field.”
Below are my bullet points from his presentation:
· GV’s current biggest concern is geopolitics. He sees the West as losing its resolve to support Ukraine and that Putin/Russia may ultimately prevail. This could spell more trouble in that region.
· Equally dangerous is the Middle East. Here, Iran is the primary bad actor, and we need to do everything possible to thwart their nuclear ambitions. The attacks of the Houthis in the Red Sea are also a major concern.
· GV doesn’t see China making a move on Taiwan this year because China has other more pressing domestic problems. He also says the US-China relationship is “ice cold” with both Republicans and Democrats seeing China as a geopolitical adversary and threat.
· GV sees the US economy as being in relatively good shape and he sees no chance of major legislation on taxes or government spending in this election year.
Our 2024 economic outlook is akin to driving your car on a foggy night.
· Unless something crazy happens, the presidential race will be Biden versus Trump, and if the election were held today, Trump would win. Biden’s age and health are major issues, as are illegal immigration and crime.
· GV fears an outbreak of violence and ugly protests if the presidential election is a close one.
· He affirms that the Federal Reserve has a long-standing track record of missteps in economic forecasting. So, there is every reason to expect that they will either cut interest rates too soon or keep rates high for too long. Our economy is simply too large and too complex for the “mere mortals” at the FED to accurately predict.
As I sit here on February 1, the stock market is near all-time highs, and interest rates are calm. At Riverfront, we are sticking with our cautiously positive outlook for at least the next quarter. Stock market history tells us that momentum is among the more reliable factors. So, the current odds favor the bullish investor. However, our 2024 economic visibility is akin to driving your car on a foggy night. The best approach is to slow down and keep your eyes on the road ahead. Please feel free to reach out to me with questions or comments.
Bruce
(This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.)
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