What the World's Top Financial Minds Are Predicting for 2024

Hi.

I'm Sarah Holder. I'm a new host for The Big Take, and I'm thrilled to be in your feed this week along with Seleiah Mosen in Washington, d C. And wanh in Hong Kong. Each day we'll share one big story on money from all around the world. Without further ado, here's today's episode. My colleague Sam Potter reports on markets for Bloomberg. I called him at home in London and he told me that every year around October he gets the feeling that something big is coming.

I always had this moment where I think, can I really go through this again this year?

Can I just palm it off to someone else?

What Sam has to go through is an exercise in predicting the future, or at least the version of the future Wall Street is expecting. Sam, you've had a busy couple of months reading the investment tea leaves. Tell us what you've been up to.

Yeah, I have been reading just about everything that Wall Street has written about about the year ahead. So the major banks, the biggest asset manages, major advisors, anyone who has put out an outlook for twenty twenty four, and either the markets or the economy generally global stuff.

The tea leaves he realize on are called investment outlooks, the reports that Wall Street's best and brightest released late every fall, outlining what they expect to happen next year.

It's an exercise in trying to appear smarter, better prepared, better place to manage other people's money. And oftentimes what firms will do will try to make it a bit more interesting by adding themes. You know, these are the big themes that we see, trying to make it thematic. But actually sometimes that just makes it much harder to read.

Sam has had a lot of practice reading and digesting these reports over the last months of twenty twenty three. Who's gone through more than six hundred and fifty of them?

I have been pouring through it, and it is amounted to dozens and dozens of outlooks and hundreds and hundreds and probably thousands of pages.

So I'm a little bit cross eyed at this point.

As he reads, Sam looks for the clear takeaways, categorizes the responses, and assembles each institution's key predictions in a database on Bloomberg dot com.

So I like the ones that are kind of clear, concise and hopefully making firm predictions for the year ahead, because a lot of what they do as well is say very vague things like the path of inflation is going to be important in the year ahead.

And I mean, anyone on.

Wall Street knows that the more reports Sam takes in, the more he starts to see the big picture, the consensus view on just about everything the financial world is anticipating in the year to come. And that consensus view matters because Sam isn't the only one reading these outlook reports. All kinds of financial professionals are taking in the same information and investing trillions of dollars based on what they see today. On the show, what are the world's top

I've been doing this for about five or six years now.

The thing that stood out to me this year was slightly broader consensus than normal, and it's not a very exciting one, I have to.

Say, nor is it scary.

Basically, the consensus on Wall Street at the moment is that the interest rate hikes that we've seen over the last eighteen months to two years, they're finally going to start to bite properly, finally going to start to put the brakes on the economy. So we're going to see some economic slowdown, but it's not going to be expected to be extreme. It's going to be mild benign. These are the sort of words they're throwing around, a healthy.

Slowdown, a mild benign or healthy slowdown. In other words, Sam says Wall Street is for the most part expecting that the US will pull off what's been called a soft landing.

The Fed, policy makers around the world, central bankers, they are trying to walk a typewrote. They're trying to increase those borrowing costs to cool the economy so it's not growing too fast, so prices aren't rising too quick. But they want to do it gently and hence the soft They want to do it in a way that companies can still borrow. It's more expensive, but it doesn't put the brakes on their operations. Consumers can still spend and

An important thing to know is those hundreds of Outlook reports Sam and others have been reading and also come out in November.

That means that they were all written and published, often well before the final FED meeting of twenty twenty three.

Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people.

So we've already seen in that final FED meeting the first hints of the FED preparing for a pivot next year.

Today we decided to leave our policy indust rate unchanged and to continue to reduce our securities holdings. Given how far we have come, along with the uncertainties and risks that we face, the committee is proceeding carefully.

It's an indication that the rate height cycle is at its peak now, that we're not expecting any more increases, and that the next move Willbeit it may be a long way off, but the next actual move in rates might be a cut, so possibly the broad view is that the Fed's aggressive hiking, and it was aggressive hiking the Fed. It has successfully put the brake on to inflation. It's still at at a higher level, still above target. But most of these outlooks, the majority certainly are expecting

Declining interest rates, the taming of inflation. Those are all good things in the eyes of the market, and after most of those outlooks were published, the stock market went on a tear. You can hear how exciting it was for finance journalists at the time.

Tech acts were certainly in the start of the show.

For most of twenty twenty three, the so called Magnificent seven fuel devices.

Very strong years, a strong run that is, of course, you can chalk that up to the boom of interest in AI that has helped lead the charge for the so called magnificence Amazing.

The Nazak one hundred is setting up for its best year going back to nineteen ninety nine, the Composite for its best year since two thousand and three.

The Nazaq one hundred went up by fifty percent at the end of twenty twenty three. That's the biggest run since the dot com boom. A lot of regular people who are not writing these investment outlooks feel like the economy is worse than it looks on paper or actually is. Is there a sense that the national mood in the US is going to change in the next year.

I think.

You probably have to allow for the fact that Wall Street is maybe not well attuned to Main Street always. But the thing that surprised Wall Street and that surprised everyone really was the strength particular of the Americans.

Consumer.

Financial analysts around the world were caught off guard by how much money American consumers spent through twenty twenty three. A lot of that excess spending was later attributed to Americans being able to save extra money during the pandemic with help from stimulus checks and pandemic closures. Sam says the broad view is that consumers will keep on spending through the next year, but not all of the reports he read agree with that prediction.

The bearish guys out there, the outliers, are saying, well, I hang on. The consumer is running out of cash, the pandemic savings, the pandemic dividend that some called it. People don't have that money anymore, and they're starting to get nervous, and borrowing has become harder and more expensive. And so the question for the year ahead is going to be how resilient is the consumer going to stay.

Can't speak to the people.

On main street, but certainly the bears are worried that consumers are running out of cash, and if they're right, then it could be a harder landing than consensus thinks.

If twenty twenty four unfold like the outlooks say it will, how will the year feel for consumers around the world.

The outlooks pretty gloomy in terms of Europe, in terms of the UK, those economies are not expected to be firing on all cylinders anytime soon.

You know, China has been struggling with some own domestic issues.

It's not coming to rescue the world with sort of powerhouse expansion or policies. Everyone's very domestically focused at the moment. Europe is still trying to tame inflation. So there'll be no great demand surge, is the general view. It's going to be a kind of messy picture, and I don't think that. I don't think that necessarily bodes brilliantly for the consumer, because there's going to be no big boom.

Sam has been writing these outlooks for years, and he says it's important to take these predictions with a grain of salt.

The truth is that probably three out of the last four or five years have been very and to how Wall Street expected. There seems to be we've been in this period where something comes out of the blue to disrupt everyone's kind of thesis. So in twenty twenty we had the pandemic, which by March was debrailing economies worldwide. Changed the picture for everyone. In twenty twenty two, also

That have gone on.

Those disruptive forces can also take the form of unexpected growth, like the surprising strength of the consumer and the explosive rise of AI related stocks. In twenty twenty three, Sam says all the uncertainty and wrong predictions of the last few years are likely part of what's behind this year's middle of the road consensus view.

Perhaps that's a reaction to what has gone before. No one wants to make a really big call right if you've improved wrong a.

Few years in a row.

There are a lot of unknowns on the horizon in twenty twenty four. One of the big ones is whether the AI frenzy can be expected to hold. Do experts have a sense of whether that bubble will burst?

The outlook for twenty twenty four is actually pretty good regarding AI.

I think Wall Street doesn't see this as a sort of flash in the pan.

It sees AI as a thematic shift or an evolution.

That isn't finished yet.

I mean, I'm sure a lot of people listening to this they will have used AI tools, and they'll know that the benefits and limitations from what I can tell from the outlooks, But a lot of them lay out AI as an investment theme, not just for twenty twenty four, but for the.

Next couple of years.

Elections are another big unknown. In twenty twenty four, voters could change the political leadership of nearly half the global economy. We've got elections coming up in Taiwan, the UK, India, the US. How are investment outlooks grappling with those specific political unknowns.

The biggest issue probably is the US election. The US is the biggest economy, it leads the world. Whoever wins the election will set the term for foreign policy, economic policy, and that feeds into all the other economies and markets in the world. And yet there is no clear front runner for the election in the US yet, and so most of the outlooks they're not ready to make a call on that yet.

Or they'll say something that will h their best assisting.

Just prepare for volatility, be ready, and it will get worse as we get.

Closer to the addction.

So much of what will affect markets in twenty twenty four is nearly impossible to predict. So what's the value of all these outlooks that's coming up? With so many unknowns, it is always possible that the consensus view will prove to be wrong one outlook, Sam Read called it a fairy tale. That means it's also possible one of the outliers will be right. So what are they saying on

Well, I've been covering markets and Wall Street long enough to know that at the end of the day, nobody knows anything because you see the biggest experts humbled by unexpected things, and you see people get lucky all the time or very unlucky. It is a thankless task for these guys doing this every year, knowing because it's like an expected thing.

You tell me what's going to happen next year.

Everyone knows that the world could be very different in a few weeks, never mind a few months.

So but they show.

Up, they keep doing it, and I like to look at it for ideas and to see who's reasoning it out and why they think this, what the rationale is in a way to inform some of the reporting that we do in the year ahead, you know, because we'll be looking in certain areas and looking for certain things.

So it's just a fascinating project for me.

Thank you so much, Sam, really appreciate it.

My pleasure. Thanks for having me.

Thanks for listening to the Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by David Fox. It was edited by Jilda Di Carly and William Selway. It was fact checked by Tiffany Choi. It was mixed by Alex Sugura. Sage Bauman is our executive producer and head of Podcasts. Thanks for tuning in, We'll be back tomorrow.