The phrase “batten down the hatches” comes to mind when we think about what might be in store for us in 2024. If we look at what is on the itinerary, we see two elections, one in the USA and one in SA; and we see two raging conflicts, one in Gaza and one in the Ukraine, both with the potential to spiral out of control. But that is only part of it. China is still eyeing Taiwan, and the USA is salivating to do some damage in Syria and Iran. On a more direct investment matter, we are all expecting to see a mild recession in the USA with inflation and interest rates coming down.
On the geopolitical front things are confusing. When Russia invaded the Ukraine in 2022, we all thought that Europe was going to freeze to death because they were heavily dependent on Russian gas and oil. We all thought that the EU would be blackmailed by Russia because of the EU’s dependence on Russian energy sources and that oil would spike to over $150 per barrel, but that didn’t happen. Somehow, the EU got their energy from other sources and oil is still around $80 per barrel. The interesting thing to note is that the polarization of the world economies between East and West is taking shape with the winner being the West for now. Equity markets in Europe and the USA are all positive, but China, Russia and countries that support them, like SA, are all struggling.
Currently, the frontrunner for the Republican presidential nomination in the USA is Donald Trump. He is fighting all sorts of criminal and civil law suits in the US, but if his opponent will be Joe Biden, up for re-election, you have to get ready for some more Trump. How will this impact your investments? Trump is pro-business and pro-USA, so if you hold US shares you might be okay. But Trump is also pro-Putin, anti-China and trigger happy, so hold on to your hat.
In SA we might see the ANC lose their outright majority, which might mean some improvement in the way our country is being governed. This might lead to some strengthening of the rand and a sentiment boost to bonds, but will it change the perception of international investors regarding the potential of our companies?
Perhaps we should just accept that there are way too many moving parts to predict an outcome. There will always be uncertainty in our world and social media will fuel the flames of imminent disaster, but although not all companies, regions or asset classes will perform well, there will always be those that do. To illustrate this point we only have to look at the current situation in the USA. There are only around seven companies that are shooting the lights out. The rest are flatlining on average. So if you invested in those seven companies, you have made a fortune; but if you invested in seven others, you might be just okay. The biggest positive impact on your investments will be the lowering of interest rates in 2024. If no geopolitical or natural disaster pops up, we might be in for a good year.