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2024 Investment Outlook

2023-12-30, Michael Thompson

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2024 Investment Outlook

We are wrapping up a positive year for most investors. Risk assets ruled with crypto posting the highest returns and equities coming in second. In this article, we’ll briefly examine 2023 performance compared to predictions, and focus on projections for 2024. We include predictions from prominent institutions and individuals on stocks, bonds and other assets. Below is a quick summary of the highlights.

  • Most sources expect interest rates to remain at the current level until mid-2024, and to drop afterward.
  • From our sources, the average projection is for the S&P 500 to grow 3.6% in 2024. Some expect small cap and international stocks to earn more, but there's no consensus on this.
  • For Bitcoin, the mean and median predictions are about 100k USD (over 100% return). These Bitcoin predictions have historically been wildly optimistic though (e.g. the mean projection for 2022 was over 120k when it actually sank below 17k USD).
  • Our sources projected gold to remain roughly at its current price range through 2024.

The article is organized as described below.

Economic environment

Last year's consensus predictions of interest rates and inflation reduction were unusually accurate. However, the consensus anticipated a recession that’s so far been avoided, presumably by the large fiscal stimulus in the U.S. and Europe along with the continued strength of U.S. consumers with healthy cash reserves. Let’s see what’s being predicted for 2024.

First, JP Morgan estimates that excess savings from the COVID era are now depleted for 80% of consumers. By mid-2024, they expect it will essentially be gone.

While the labor market is not yet “bad”, hiring rates declined throughout 2023. Layoffs climbed while the number of job openings per unemployed worker dropped. Most expect these trends to continue in 2024.

Corporate bankruptcies increased in 2023, and many expect this to continue in 2024. As with the labor market decline, the economy could still be absorbing the impact of high 2023 interest rates in 2024.

Inflation cooled substantially in 2023, but getting inflation down from 3 to 2% could prove more difficult than dropping it from 9 to 3%, according to an article from Harvad Business Review. Matthew Klein, author of the The Overshoot newsletter says: “overall inflation remains somewhat faster than before the pandemic because wages and spending (in dollars) are both rising slightly faster than before. If underlying nominal retail spending is rising 7% a year it is hard for inflation to hold the line at 2% a year for very long.”

This brings us to the big R word. Will we see a recession in 2024? There are many arguments for/against a 2024 recession. A big one is the inverted yield curve, which historically precedes a recession by 1-2 years. According to a recent survey from the National Association for Business Economics, 76% of economists estimate the probability of a 2024 recession below 50%. I wouldn’t bet on (or against) a recession. It’s not a huge dividing line anyway—anemic growth is not much different than a mild recession.


The S&P 500 has done very well in 2023 (to date), mostly due to a small number of large companies. Through November, the “Magnificent Seven”—Apple, Alphabet, Amazon, Meta, Microsoft, NVIDIA, and Tesla—increased 70% (cap-weighted)! The other 493 stocks in the S&P 500 increased less than 10%, giving an overall cap-weighted return of 24% for the index to date.

At the start of 2023, the major institutions in the US predicted, on average, a 3.7% nominal return for the S&P in the year. They missed the mark by a staggering 20 percentage points! From 2000-2023, median Wall Street forecasts missed reality by about 14 percentage points on average. Simple methods like using the historical average each year have given better predictions.

What’s in store for 2024? From the sources below, the mean expected return for the S&P 500 in 2024 is 3.6%, and the median is 5.6%. Predictions ranged from -11% to +14.4%. As always, take these with a grain of salt. What happened last year is normal—most predictions, even averages, are way off.

SourceS&P 500 % Change
JP Morgan Chase-11
Morgan Stanley-4.6
Wells Fargo-2
Bank of America6
Goldman Sachs8.1
Yardeni Research14.4

Equity outlooks back these predictions with many negative and few positive arguments. We’ll discuss some of these briefly below.

Goldman Sachs thinks the record-high allocation of 6 trillion USD in money market funds will help stocks in 2024. They foresee this money shifting to equities, blocking potential downturns. While this is certainly possible, the maintenance of high money market yields could also entice more investors to leave the stock market.

One of the clearest negatives for the U.S. market is that it will start 2024 with high valuations. According to a Goldman Sachs report, the S&P 500 P/E is at the 87th percentile since 1976. This means you’re paying a premium for stocks right now. If stock prices revert to a “normal” P/E, they will need substantial earnings growth to generate a positive return. Another Goldman report estimates that markets have priced in overly optimistic GDP growth.

So what about earnings growth? Most institutions foresee little, if any, growth. For one, it may be difficult to increase margins. The costs of taxes, interest, and labor have increased and will likely keep earnings growth on par with sales growth. Some believe AI-induced efficiencies could boost margins, but the effect in 2024 may be minimal.

Another negative is the current 5.5% 3-month Treasury yield. This will likely be a tempting alternative to stocks, absorbing capital that could have otherwise boosted stock prices. Of course, plunging yields would reverse this argument.

In my opinion, geopolitics are an underestimated threat to equities in 2024. Russia, North Korea, and factions in the Middle East are actively fighting western influence. While the current problems in the Red Sea and Ukraine have not had major impacts on business, the spread or escalation of these issues in 2024 is plausible. For example, cyberattacks could handicap tech companies. More missile/drone attacks on trade routes could further slow and increase shipping costs, setting back globalization and increasing inflation. While such threats always exist, they are on a steeper rise recently.

Market Sections

Once again, we’ll start a year with ex-US and smaller-cap stocks undervalued by most metrics. As the mega-cap U.S. stocks climbed again in 2024, the valuation difference between small and large-cap stocks is drastic. For more information see MSCI’s Mind the Gap in Small- and Large-Cap Valuations.

Despite the disappointment in 2023, I’ve remained overweight on small-cap (value) and international equities. I plan to continue. There’s little concensus on this from the major institutions. Morgan Stanley told investors to expect small-caps to outperform this year. Goldman Sachs, however, provided the opposite view, expecting the magnificent 7 to continue outperforming the market.

Bitcoin and cryptos

Bitcoin has gained 163% YTD in 2023 and has significant catalysts on the horizon for 2024. Some of the catalysts are listed below and will be discussed herein.

  • Approval of US spot ETFs
  • Halving
  • Various fringe theories

Most experts and institutions, including Bloomberg, expect the US to approve the first spot Bitcoin ETFs—up to ten—early in the year. Data analytics firms expect this event to raise the price of a Bitcoin to 50-75k USD, as it would likely bring more mainstream and institutional investors into crypto.

It’s worth mentioning that spot ETFs, if approved, represent more than just another vehicle for Bitcoin investment. Possibly more important than that, they represent a level of approval by the US government—a peace of mind for investors previously scared of government bans. ETF approval may to some extent be coupled with draft legislation that could enhance regulatory clarity for crypto investments in the US. It’s easy to imagine such news bringing new demand to Bitcoin and crypto.

VanEck provided this estimate of Bitcoin inflows associated with spot ETF approval, by comparing the event to the introduction of gold spot ETFs in 2005.

Another catalyst in 2024 could be the halving, expected to occur in or around April. While many point to this as an automatic boon to Bitcoin price, history shows significant price increases associated with halvings occur anywhere from a year before to a year after the halving occurs. Senior analyst Nicholas Sciberras from Collective Shift says: “The jury is still out on how priced-in the halving is, or how important the event is in the grand scheme of Bitcoin’s price trajectory.”

An efficient market—and I’m not saying the Bitcoin market is or isn’t—would always price in such predictable events, and hence there would be no sudden price change around the time of the event.

As usual, there are many fringe theories for why Bitcoin price may explode next year. Robert Kiyosaki claims the BRICS nations (Brazil, Russia, India, China, and South Africa) will unveil a gold-backed cryptocurrency that will substantially devalue the US dollar (and hence raise the Bitcoin price measured in US dollars). This is another one to take with a grain of salt. Kiyosaki's investment predictions have not been good, including his highest conviction call for the worst stock market crash in history in 2016 (it turned out to be an above-average year for stocks).

One positive for crypto is that more “garbage” was taken out in 2023. After crackdowns of FTX and other scams in 2022, the cleanup continued in 2023. Most notably, the U.S. Commodity Futures Trading Commission filed civil enforcement action against Binance, and its founder and CEO Changpeng “CZ” Zhao. As the number of bad actors decreases, the safety of crypto investment increases.

While not a 2024 event specifically, the flow of money from older to younger hands may support Bitcoin over the long haul. In the upcoming decade, about 80 trillion USD will be inherited by the heirs of the silent generation and baby boomers. These younger (more computer savy) heirs are likely to invest more of this money in crypto.

Yet another bull case for Bitcoin revolves around innovations. Sciberras pointed out the increased demand for block space on Bitcoin’s network due to recent developments like ordinals and BRC-20 tokens. Lightning Network payments have increased over 1200% over the last 2 years making Bitcoin more useful for payments.

There are many other cryptocurrencies that may deliver real utility as well. For some applications, smart contracts could be of great utility and worthy of investment.

We leave this section with some 2024 Bitcoin price predictions. These predictions have been extremely inaccurate historically, so I’d recommend using these for entertainment purposes only—please don’t gamble your savings on these predictions.

SourceUSD per BTC
Samuel & Co Trading50,000
Motley Fool100,000
Standard Chartered Bank100,000
Robert Kyosaki120,000


Many experts anticipated a good year for bonds in 2023. They were yet again disappointed as the S&P returned 24% while investment grade bonds eked out only a small positive return. Failed recession predictions and increased equity valuations are mostly to blame.

With inflation apparently subsiding, higher bond yields, and stretched US equity valuations, many are doubling down on bonds. Vanguard increased their estimate for bond returns over the next decade to 4.8-5.8% (about the same for international). This leaves no equity risk premium for US stocks, as Vanguard predicts just 4.2-6.2% for those. Indeed, based on current valuations, the global equity risk premium is the lowest it has been since the lost decade (1999-2009).

There’s no consensus on “easy” Fed rate cuts. Some think cuts may only happen if there are substantial economic issues. They fear that deglobalization and energy prices will maintain pressure on inflation, and high rates may be maintained to counter this. Others think the Fed will default to cuts so long as there’s no upward move in inflation first.

One of T Rowe Price’s highest conviction calls in their 2024 outlook was a steepening of the yield curve. They attribute this to the US Treasury issuing more long-term debt to handle ballooning deficits. However, Morningstar’s “Where to invest in bonds in 2024” indicates longer-term bond yields could fall the most. The overall concensus may be baked into current prices.

A the time of this writing, bond yields are as follows.

  • Short-term treasuries 5.4%
  • 10-year treasury 3.9%
  • Moody’s Seasoned Aaa 4.7%

Comments about the attractiveness of US treasuries don’t apply to Europe, according to State Street. They see more stubborn inflation there and the potential for higher yields in the near future.

Some investors were disappointed with the correlation between stocks and treasury bonds recently. Most intended for treasury bonds to counter stock market swings, as they normally do, but the two moved in lockstep. Given current yields, it’s less likely that will recur anytime soon—bonds are in a better position to serve you in the next recession. However, in the unlikely event that the economy produces high growth and inflation in 2024, it would likely be yet another bad year for bonds.

For more insights on the 2023 bond market, see State Street’s 2204 Fixed Income Outlook, Morningstar’s “Where to Invest in Bonds in 2024,” or abrdn’s ”Fixed income: Can 2024 be the year of the bond?”.


Gold is wrapping up a good year with a 14% price gain to date. It’s current price exceeds 8 of the 10 institutions' predictions we quoted in our 2023 outlook, but the 14% gain is remarkably close to the average (16%) of the institutions’ predictions. Gold fared better than the broad commodity market and global bonds.

Gold’s success in 2023 is has been attributed to market volatility, geopolitical turmoil, and uncertainty across monetary and fiscal policy. In the first 3 quarters, central banks reportedly purchased 800 metric tons of gold. That’s 14% more than the same period in 2022 (and 2022 purchases doubled 2021)! Central banks, primarily China and Poland, are creating substantial demand.

So what are the expectations for 2024? State Street sees 3 positives below for gold in 2024.

  • Lower interest rates after inflation stabilizes and the economy slows down could boost gold.
  • Most expect the US dollar to weaken in 2024, boosting the value of gold prices in USD.
  • Growing bullish sentiment as multi-year moving averages climb.

2023 will likely complete 3 consecutive years of net outflows from gold ETFs. It’s not clear of this is a bull or bear case: gold has performed just fine with these outflows, and if these sellers decide to rebuy it would be another factor pressuring prices up. The US will likely approve spot Bitcoin ETFs in 2024, which may contribute additional outflows from gold ETFs.

By most accounts, US stocks are at stretched valuations. This increases the risk of an equity downturn, which could see investors flee to gold or other assets.

My reason for having some gold every year is simple: correlation. As shown in our table of correlations, gold has the smallest correlation with stocks and bonds. I get some peace of mind holding something less coupled to the whims of government and business, and without the dramatic drawdowns and scandals of Bitcoin.

I’m not convinced that lower interest rates will boost gold prices. There is no guarantee rates will recede significantly in 2024. Even if they do, rate movements are historically not so correlated with gold prices. This year is a perfect example.

A number of predictions for the price of gold in 2024 are provided in the table below. These are surprisingly pessimistic IMO—the average amounts to a 0% return for the year! The average predictions have been remarkably accurate the last few years, let’s see what happens this time.

SourcePrice (USD)
World Bank1700
ABN Amro2000
Goldman Sachs2133
JP Morgan2175
UBS Global2200

For more information check out State Street’s 2024 Gold Outlook or the World Gold Council’s Gold Outlook 2024.

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