4 Market Trends for Retail Investors to Watch Out For in 2024

Traders Continuing to Second Guess the Fed’s Signaling on Rate Cuts in 2024

At the start of the year, futures markets indicated that traders were betting on the Federal Reserve (aka ‘the Fed’) making five rate cuts in 2024, starting from March. This diverged from chair Jay Powell’s messaging that rates would remain ‘higher for longer’ in order to tackle inflation. 

But recent market data has presented a stronger than expected outlook for the US economy, meaning that investors’ hopes of a March cut in interest rates from the current 5.25%-5.50% level now looks highly unlikely. Despite traders calling the start of the rate cutting cycle early, they continue to take a more optimistic view than the Fed.

Timing interest rate cuts and hikes is important for investors as central bank interest rates have a significant impact upon how investors value stocks and bonds. Lower interest rates could cause a rally in stocks owing to the lower cost of lending for companies.  

Fixed Income Making a Return

During the ZIRP (Zero Interest Rate Policy) era, stocks had some of the longest bull runs in history, but fixed income yields were depressed and some even went into negative territory. 

However, since the hiking cycle in interest rates began, yields have jumped. A 10 year US Treasury is currently yielding around 4.2%, which is a significant increase from the 1.3% levels seen in 2016 or the super low 0.5% mark seen during COVID.

This means that the risk premium between stocks and many fixed income investments has thinned dramatically and investors should keep an eye out for how this trend develops in 2024.

More Active Investing in US Stocks

Last year, the advances in AI innovation led to the so-called ‘magnificent 7’ tech stocks with significant AI projects leading the charge in the US and drove the S&P 500 up by a stellar 24% in 2023.

The likes of Nvidia’s surge arguably skews the picture of the US’s overall performance, given the index is weighted by market cap. Whilst AI tech stocks had an excellent time last year, the remaining non-AI stocks had unspectacular years. 

This has led to a debate on whether investors are right to invest in passive trackers in order to benefit from edge technologies such as AI. The market cap nature of indices such as the S&P 500 helps retail investors capture a large proportion of the AI wave, but taking a more active approach would lead to even higher returns. 

The First Bitcoin ETF Reigniting the Price of BTC

Following the SEC’s approval for ETFs holding bitcoin to trade on exchanges, the price of BTC/USD has breached the $50,000 mark for the first time since 2021. This follows a two year ‘crypto-winter’ period where investors lost confidence in crypto currencies after a number of scandals and collapses, such as FTX. The SEC’s decision to approve of spot Bitcoin exchange traded products, such as ETFs, is an important milestone for investors interested in crypto and DeFi. Owing to the historic lack of regulation, it has received significant criticism from some mainstream investors. But this decision could signal a new dawn for Bitcoin investing.

Bitcoin is relatively high risk compared with other traditional asset classes, but it could offer diversification benefits for investors if stock markets correct in 2024. 

N.B. This article is observing market trends only and is not intended to be taken as investment advice. Customers invest at their own risk and should undertake their own research before trading.