Understanding the Market | The 12 Major Events that will Shape the Market in 2024, all in this Timeline

Less than a week into 2024, global assets were in turmoil, U.S. bond yields and the U.S. dollar rose, and U.S. stocks suffered their worst start since 2008. This may be just the tip of the iceberg, the future trend of U.S. stocks may be more difficult to predict, and the key lies in the Federal Reserve. As Bank of America's chief investment strategist Michael Hartnett pointed out in his latest report, the Fed and U.S. bond yields are driving the direction of bond and stock markets, and falling inflation and interest rates could have a positive impact on risk assets, but lower interest rates could have a negative impact on risk assets if unemployment rises. For the capital markets in 2024, the Fed and U.S. bond yields are undoubtedly the two most critical variables. However, **in terms of asset prices, Hartnett see the greatest impact in three areas: pricing, corporate earnings and new events affecting interest rate (policy) expectations. * * There will be many major macro events this year. Hartnett list 12 major events that may affect profits and interest rates in 2024:> January: a big month in Asia, focusing on the election in Taiwan, Japan's YCC, and US debt issuance.>> February: The geopolitical situation improves.>> March: The highlight is the March 20 FOMC meeting and whether the Fed will cut interest rates for the first time.>> April: Whether the US economy can "soft landing" will be revealed.>> May: Google's antitrust case will be closed from May 1 to 3, focusing on whether the "Big Seven" of US stocks can withstand the test.>> June: OPEC annual meeting, EU elections are the focus.>> July: Focus on whether U.S. debt will be the longest upside down since the Great Depression in 1929.>> August: Focus on the impact of U.S. "swing state" unemployment on fiscal policy.>> September: Focus on the size of money market fund assets.>> October: BRICS countries hold summit to focus on emerging market stock markets.>> November: U.S. election results announced, focusing on the impact on U.S. stocks.>> December: The best month ever for U.S. stocks. ## January: Asia's Big Month January is Asia's "Big Month": January 13, Taiwan, China's Election Voting Day, January 22, the Bank of Japan may end extremely loose monetary policies such as YCC (Yield Curve Control) and NIRP (Negative Interest Rate Policy). The biggest event may be the announcement of the first-quarter U.S. Treasury issuance plan on January 29. The lower-than-expected issuance scale announced on October 30 was the trigger for the "all rebound" in the fourth quarter. U.S. bond yields fell from 5%. To 4%. In addition, January 19 may be the day when the U.S. government shuts down. U.S. debt has increased by $10 trillion in 106 days, and the current debt scale exceeds $34 trillion. The consensus expects a $970 billion U.S. bond plan to be announced on Jan. 29, and the fear of higher numbers = higher yields, U.S. bonds are in a cyclical bull market in a long-term bear market.! ## February: The geopolitical situation is expected to improve. On February 24, the second anniversary of the outbreak of the Russian-Ukrainian conflict, geopolitical confrontation and political polarization may bring benefits... Monetary and fiscal policies are more relaxed than the macro situation requires. 2024 is a global election year. Countries accounting for 60% of the world's GDP, 80% of the market value of the stock market and 40% of the population will hold elections this year. It is necessary to calm geopolitics, avoid soaring oil prices and be optimistic about the soft landing view. The drop in oil prices will be a catalyst for strong economic growth in Africa and the United States in the first half of 24 years.! ## March: The Federal Reserve's "Interest Rate Cut" Becomes the Highlight March 5 is "Super Tuesday" in the United States, but the highlight is the FOMC meeting on March 20 and the Federal Reserve's first interest rate cut (Bank of America's forecast). The market consensus forecasts a total interest rate cut of 150 basis points in 24 years. The rally in the fourth quarter of last year was in the Fed's interest rate pivot, and the shift to rate cuts may have been driven by weak growth, with the first rate cut likely to usher in a peak in asset prices, noting that some of the biggest bond market events occurred when the Fed cut rates.! ## April: Whether the US economy can "soft land" will be revealed. According to the Bank of America's forecast, the probability of hard landing/soft landing/non-landing is currently 20%/70%/10% respectively, and the landing will be revealed when the US GDP in the first quarter is announced on April 25. BofA expects S & P500 EPS to grow by more than 5% in 24 years, which requires the ISM manufacturing index to rise to 52 and the labor market to remain strong. However, it is worth noting that if the ISM for the whole of April is <50, it will be the longest period of contraction since 2000-2002, while it will last for the whole of May, the longest period of contraction since 1981-1983.! ## May: US Stock "Seven Sisters" Meet Antitrust Test If US Stock "Seven Sisters" are not considered, the closing price of S & P 500 Index in 2023 should be 4175 points, with US Stock "Seven Sisters" accounting for 2/3 of 2023 return. What investors like about big tech companies is the "moat", the ability to maintain "monopolies to protect profit margins, market share and pricing power. The Google antitrust case will be closed May 1-3, the first of three antitrust rulings that could directly affect the monopoly position of Google and Meta and weaken the long-term position of big tech companies.! ## June: OPEC Annual Meeting and EU Elections Focus on OPEC Ministerial Meeting on June 1, EU Parliamentary Election from June 6 to 9, and G7 Summit on June 13. The Federal Reserve is expected to cut interest rates for the second time on June 12 and end the quantitative tightening policy, or cause the US dollar to fall in recent weeks. It is expected that the downward space will be fully priced in the middle of the year. The key to the bulls is the depreciation of the US dollar's school uniform in the first half of the year, which is driven by the easing policy of the Federal Reserve and the narrowing of the growth gap between the United States and other regions.! ## July: Focus on whether U.S. debt will hit the longest upside-down since the Great Depression in 1929. The Milwaukee Republican National Convention will be held on July 15 and will produce Republican presidential candidates. To pay attention to the direction of the U.S. bond yield curve before July, the 3m-10s U.S. bond yield curve is currently-141bps and has been inverted for 15 months. If it is still inverted by July, the duration of the inversion will be the longest since the Great Depression (19 months) in October 1929.! ## August: Focus on the unemployment rate in the "swing states" of the United States. August in the fourth year of the presidency is often the best month for U.S. stocks. At the Democratic National Convention held in Chicago on August 19, politics has already had an impact on policies and markets, but the impact will be more obvious in August. Pay attention to the unemployment rate in some key swing states (Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, Wisconsin), and pay attention to the number of first-time jobless claims in Pennsylvania since July 2021. The highest level since; this is rare in a period of low unemployment and the president's approval rating is so low, which may mean more policy stimulus, but it may also be the beginning of volatility.! ## September: What is the size of money market funds? Bank of America expects that the size of money market funds (currently $6 trillion) may peak in September. Bank of America's analysis shows: I) the inflow of money market funds in 2023 is not unusually high (up only 25% from the average 33% annualized increase in the previous four cycles); Ii) the current inflow of money market funds will end in September 2024 (the asset size of money market funds usually peaks 14 months after the last Fed rate hike);iii) The flow of funds from money market funds will begin in March 2025 (12 months after the first Fed rate cut).! ## October: BRICS Summit The BRICS Leaders Summit will be held in Kazan, Russia, for the first time with an expanded membership (Saudi Arabia, UAE, Iran, Argentina, Egypt, Ethiopia, Brazil, Russia, India, China, South Africa). The new "BRICS 11" countries account for 51% of global carbon dioxide emissions, 46% of the population, 45% of energy consumption, 45% of oil production, and 37% of global GDP in purchasing power parity terms. However, the market capitalization of these countries is less than 25% of the total value of the global market, and emerging market stocks are at a 52-year low compared to the US stock market... The Bank of America recommends buying emerging market stocks and selling US stocks in 2024.! ## November: US Election Results Announced November 5 US Election Day, the traditional view is that although the election may bring chaos, it will not have much impact on the market. In the 2016 and 2020 elections, the situation is obviously different. The stock market rose by more than 5% in November (only Reagan was elected in 1980 since World War II), and rose by 9-14% in the following 3 months.! ## December: The best month ever for U.S. stocks does not require any major events. December is often the best month for U.S. stocks, with an average gain of 1.3 percent since 1928. This was demonstrated again in 2023, when U.S. stocks soared to near all-time highs, although they were still 12% below their November 21 highs in real terms. !