Central banks, including the American Federal Reserve Bank, are expected to play a crucial role in shaping the stock market in 2024. Since the Covid pandemic, central banks have been grappling with uncertainty, leading to concerns about the ultimate outcome. While company profits are still considered an important factor affecting stock prices, professional investors believe that the Fed will have the greatest influence on prices this year, with 52 percent of investment fund managers pointing to the central bank as the key driver.
In contrast to company profits, which are seen as a secondary 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 has raised concerns among investors due to its initial labeling it as “temporary” before having to adjust interest rates more aggressively. Despite maintaining interest rates at 5.5 percent since last summer, central bankers are still grappling with uncertainty in making key decisions.
Recent events have seen the Fed maintain interest rates for now due to a slight increase in consumer prices in March. However, despite efforts by central bankers to navigate economic conditions uncertainties persist and have left investors uncertain about the future. 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 like Plassard advises investors not to be overly risk-averse and suggests that American stocks, particularly smaller and medium-sized companies could perform well while emphasizing flexibility and caution when navigating evolving market conditions.
