Monetary policy is expected to shape the stock market in 2024, with the American Federal Reserve Bank playing a crucial role. Since the Covid pandemic, central banks have been struggling to navigate through uncertainty, leading to concerns about the ultimate outcome. Professional investors believe that the Fed will have the greatest influence on stock prices this year, with 52 percent of investment fund managers pointing to the central bank as the key driver. In contrast, only 33 percent expect company profits to be the main factor affecting prices.
John Plassard, a senior investment specialist at Bank Mirabaud, views incorrect monetary policy decisions as the biggest risk for financial markets currently. The Fed’s handling of inflation, initially labeling it as “temporary” and then having to adjust interest rates more aggressively, has raised concerns among investors. Despite interest rates remaining at 5.5 percent since last summer, central bankers are still grappling with uncertainty in making key decisions.
Recent events have seen the Fed maintaining interest rates for now due to a slight increase in consumer prices in March. However, the unpredictability of economic conditions has left investors uncertain about the future. The shifting expectations among investors have led to rapid revisions in projections, from anticipating a recession to considering scenarios such as a soft landing or a possible take-off in economic growth.
Looking ahead to 2024, with over 40 countries holding national elections and potential political shifts, the economic landscape remains uncertain. Despite challenges, Plassard advises investors not to be overly risk-averse, suggesting that American stocks, particularly smaller and medium-sized companies, could perform well. While the outlook remains uncertain, experts like Plassard continue to monitor the situation closely, emphasizing the need for flexibility and caution in navigating the evolving market conditions.