Markets expect a strong 2024, with lower interest rates fueling growth

Investors are looking forward to 2024 with the expectation of an even better year as inflation is on a downward trend, and lower interest rates are finally on the horizon. In its most recent meeting, the US Federal Reserve announced it is done with rate hikes and it will look to cut interest rates in the next year, and enthusiasm has pushed US stock exchanges indices DJI30 and NASDAQ 100 to new all time highs. The markets’ optimism has also spread to Romania, with the BET index also reaching new record highs.

By eToro analyst for Romania, Bogdan Maioreanu

The lower interest rates outlook and return to earnings growth for companies are seen to be the key drivers of stocks in 2024. It is possible to witness a rotation from US and tech to Europe and emerging markets, with interest in real estate and small caps to pick up later. While Fed chair Jerome Powell mentioned that talk about cutting rates was “clearly a topic of discussion” for policymakers at the latest FOMC meeting, in Europe the ECB President Christine Lagarde cautioned against bets on imminent cuts to interest rates. However, investors seem confident that the cuts are coming, particularly with the latest data showing an easing of price pressures in the eurozone.

Most retail investors now expect that the US stock markets will perform best in 2024. According to a poll carried out on the eToro social investment and trading platform at the end of November 2023, 52% of respondents are pointing to the US as the top performer of this year, while 25% are looking at China and 16% believe it will be Europe. When asked about sectors, 59% of respondents continue to believe in technology, already one of the best performers last year, while 20% are looking toward the financial sector that did not perform well in 2023. Energy will be in focus for 18% of respondents. But 2024 is a complicated year with geo-politic tensions and elections all over the globe including Europe and the US that can bring surprises and volatility in the markets.

After a sustained rally in the last quarter of last year and 2023 highest return, crypto is believed to be the best performing asset for 2024 by 59% of retail investors, the polls show. stocks are seen on top by 32% and commodities by 7% of investors. These views about crypto are translating into the best performing investment themes for 2024, with 56% of investors naming crypto assets, followed by disrupting tech (28%) and clean tech (13%).

2023 was a strong performer, with S&P500 up more than 24%, DJI30 exceeded previous all time highs and finished up 14% and the tech heavy Nasdaq soared 43%. European stocks also fared good, DAX gaining more than 20%, CAC40 more than 16% and the Romanian BET index gained over 32% in 2023.