- The year 2023 was a bullish one for stock markets around the world.
- At the same time, some asset classes had a year to forget.
- In this piece, I will share my 4 predictions for the financial markets for the upcoming year.
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- Soleno Therapeutics Inc (NASDAQ:SLNO) (+1932%)
- Carvana Co (NYSE:CVNA) (+1018%)
- Cipher Mining (NASDAQ:CIFR) (+637%)
- Marathon Digital (NASDAQ:MARA) (+587.3%)
- ImmunoGen Inc (NASDAQ:IMGN) (+497.8%)
- MoonLake Immunotherapeutics (NASDAQ:MLTX) (+475.1%)
- Ibex 35 Spanish (+24.76%)
- FTSE 100 British (+4%)
- DAX (+21.31%)
- Japanese Nikkei (+28%)
- Euro Stoxx 50 (+20.19%)
- CAC 40 France (+17.52%)
- FTSE MIB Italian (+30.03%)
- S&P 500 (+24.23%)
- Dow Jones (+13.70%)
- Nasdaq (+43.42%)
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The market exhibits robust breadth, indicating a higher percentage of stocks on the rise versus those declining.
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Expectations are set for interest rate reductions from the Federal Reserve (as well as the European Central Bank), particularly between 3 and 5 times, with no adjustments expected before March.
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The anticipation of a "soft landing" for the U.S. economy, steering clear of a recession, adds to the positive outlook.
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Forecasts for company earnings present an intriguing outlook.
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Historical patterns that historically fare well have been set in motion:
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An election year featuring an incumbent president, as seen in 2024, historically aligns with a bullish scenario for U.S. stocks. Since 1949, the S&P 500 has averaged a gain of nearly +13% in such election years.
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Eight-week winning streaks, mirroring the current trend, tend to be bullish for U.S. stocks over the next 12 months.
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When the S&P 500 enters December with a gain exceeding +10% for the year, the subsequent year sees an average increase of +19.5%.
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- January: an average rise of +2.4%.
- First quarter: an average increase of +6.6%.
- Year: an average increase of +19.5%.
- Halving: This event, occurring approximately every four years, involves cutting in half the rewards that Bitcoin miners receive for validated transactions. The primary objective is to sustain balanced and stable growth in the Bitcoin market by regulating the issuance of new coins and constraining those already in circulation. Previous halving events transpired in 2012, 2016, and 2020.
- SEC Decision on Bitcoin Spot ETFs: Investors anticipate a positive stance from the Securities and Exchange Commission (SEC) before the January 10 deadline, supporting the launch of Bitcoin spot exchange-traded funds (ETFs) in the market. Companies like BlackRock (NYSE:BLK), Fidelity, and ARK Investment Management are eagerly awaiting approval for such ETFs. Additionally, there is speculation about the potential conversion of the Grayscale Bitcoin Trust into an ETF in the near future.
Despite the bullish year, 72% of S&P 500 stocks performed worse than the index in 2023.
Noteworthy annual performances include Abercrombie & Fitch Company (NYSE:ANF), boasting 285% growth, its best since going public in 1996, surpassing even Nvidia's (NASDAQ:NVDA) impressive +239% gain.
Apple (NASDAQ:AAPL) has seen a +50% increase, solidifying its position as the world's largest company.
Meanwhile, the 60/40 portfolio (60% stocks, 40% bonds) achieved a performance unseen since 1996 in November and December.
Japanese stocks experienced their most significant annual gains in a decade, with the TOPIX index rising +25% and the Nikkei index +28%, marking their best performance since 2013.
The Magnificent Seven, the seven largest U.S. tech stocks, contributed to 64% of the S&P 500's rally this year.
They are anticipated to post a remarkable 22% earnings growth next year, double the S&P 500's advance.
Notable performances include Nvidia (+239%), Meta (NASDAQ:META) (+194%), Tesla (NASDAQ:TSLA) (+102%), Amazon (NASDAQ:AMZN) (+81%), Google (NASDAQ:GOOGL) (+58%), Microsoft (NASDAQ:MSFT) (+58%), and Apple (+49%).
Meanwhile, considering the rest of the market, the best-performing stocks for the year were:
Considering markets elsewhere in the world, here are the annual performances in no particular order:
Commodities, Cryptos and Currencies: Best and the Worst Performers in 2023
Cocoa futures posted the most substantial annual gain in over three decades (+61% in 2023), driven by crop challenges in West Africa, the world's largest producing region.
The Turkish lira hit a record low (USD/TRY) after a 49% increase in the minimum wage by the government, raising inflation and resulting in a -58.5% depreciation against the dollar this year, making it the second worst-performing emerging market currency.
The US dollar closed its worst year since the start of the pandemic, with Wall Street anticipating the Federal Reserve to lower interest rates in 2024.
In contrast, the pound marked its best year since 2017, rising +5.4% against the dollar, the most significant gain since 2017. The Swiss franc had its strongest annual performance since 2010.
Top-performing assets globally include Bitcoin (+158%), Ethereum (+97%), Uranium (+89%), Cocoa (+61%), Iron (+54%), Rice (+43%), Café (+18%), and Mexican peso (+14%).
On the flip side, the worst-performing assets include Argentinian peso (-78%), Coal (-64%), LNG (-57%), bolivar (-52%), Nickel (-44%), and WTI oil (-10%).
Investor sentiment (AAII)
Bullish sentiment, i.e. expectations that stock prices will rise over the next six months is at 46.3% and remains above its historical average of 37.5%.
Bearish sentiment, i.e. expectations that stock prices will fall over the next six months, is at 25.1% and remains below its historical average of 31%.
With bullish sentiment still high as 2024 kicks off, here are my 4 predictions for all markets:
1. S&P 500 to Have Another Bullish Year
2023 is over and we're heading into 2024. The typical question at this time is usually what can we expect from equities for the new fiscal year. I will tell you that I am optimistic. 
Anticipating a positive trajectory for the S&P 500 in the upcoming year, albeit with a potential decrease compared to 2023, I wouldn't be surprised if the gains are less than half. The optimism for a fruitful year stems from several compelling factors:
Highlighting the significance of the last pattern, historical data indicates strong performance for the S&P 500 in January, the first quarter, and the entire year when starting December with over +10% gains:
While past returns don't guarantee future outcomes, combining these historical patterns with the aforementioned four reasons strengthens the case for optimism.
2. Bitcoin to Continue Rising in 2024
Bitcoin has experienced a remarkable surge of +175% from its lows, and investors are eyeing a promising 2024 for two key reasons:
3. Crude Oil, US Dollar Relationship Set to Change
The latest data showed that crude oil inventory levels have expanded and are at the highest level since last August.
In addition, major shipping companies are resuming the Red Sea route as a U.S.-led maritime task force has been established to safeguard commercial vessels in the area.
The proportion of the world's oil that is bought and sold in currencies other than the dollar has increased. An estimated 20% of the world's oil was bought and sold in other currencies this year, as Russia and Iran sold to China and other buyers.
Some major emerging economies are moving into non-dollar commodity trading as they seek to reduce their dependence on the U.S. currency.
Twelve major commodity contracts settled in non-dollar currencies were announced in 2023, compared with seven in 2022 and only two between 2015 and 2021.
Previous attempts to dislodge the dollar from its dominant position in the oil industry have had limited success. China created a yuan-denominated oil futures market in 2018, but transactions have mainly been conducted by domestic players.
4. Choppy Year Awaits the Yen
The Nikkei index rose to a three-decade high in 2023 thanks to the Bank of Japan's ultra-loose policy and a weak yen.
But this may change in 2024. The BOJ is the only one keeping interest rates negative, although the market expects this to change and start raising them this year, something not seen since April 2007.
The BOJ will hold its next monetary policy meeting on January 22-23 and no changes are expected.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counseling or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. As a reminder, any type of asset is evaluated from multiple perspectives and is highly risky, and therefore, any investment decision and the associated risk remains with the investor.