Beware of "Black Swans"! Bank of America lists the "Top Ten Unexpected Events" to watch for in 2024.
Bank of America has released its list of potential market surprises for 2024, highlighting ten unexpected events. These include the impact of geopolitical risks on tech giants, a recovery in the IPO market, and Japan emerging as a developed market. Strategists believe that attracting investors back to stocks is one of the primary factors that may prevent a surge in bankruptcies. They also caution traders against "ditching" inflation hedges in favor of credit. Investors will demand a premium for longer-dated U.S. Treasuries. The forecast also includes advancements in Alzheimer's disease treatment driving a rebound in biotech and pharmaceutical stocks, as well as an increase in demand for reliable power. A more favorable business environment is expected to drive more capital allocation into the stock market.
Zhitong App has learned that Bank of America has released its annual "2024 Potential Market Surprises" list, which includes geopolitical risks driving the "Magnificent Seven" tech giants, the resurgence of IPO machines, and Japan becoming the most developed market in the world. Another potential uncertainty is that stocks are attracting investors due to high bond taxes, which is one of the primary factors identified by the bank's strategists led by Jared Woodard. They say that despite experiencing the most aggressive interest rate hike cycle in decades, companies may avoid a surge in bankruptcies.
The strategists wrote, "Any significant market volatility this year may be self-limiting. A sharp decline in the stock market may prompt the Federal Reserve to cut interest rates; a sharp rise further eases financial conditions and reignites inflation that the Fed believes it has contained. At least in the United States, if there is a volatile year, it will be within a range."
Currently, in the event of further market volatility, the bank's strategists prefer credit over stocks and bonds, and warn traders not to "abandon" inflation hedging.
Bank of America strategists wrote, "Considering scenarios that some investors may not have considered or consider to be unlikely is valuable work."
Other predictions by Bank of America strategists for 2024: Strategists generally believe that the United States will follow a narrow path to achieve a 2% inflation rate, but they believe "there are a hundred ways to reach 5%." As the outlook for budget deficits worsens, investors will demand a premium for longer-dated US Treasuries. After a lackluster performance in 2023, biotech and pharmaceutical stocks will rebound again driven by advances in Alzheimer's disease treatment. Investors will have a more realistic understanding of the "demand for reliable and affordable electricity." As the US presidential election approaches, the prospect of a more business-friendly environment will "ignite animal spirits and allocate more funds to the stock market."
Last year, many market forecasters, including Wien, were caught off guard by predictions that the US stock market would bottom out in 2023. Instead, the S&P 500 index rose 24%, while the tech-heavy Nasdaq 100 index soared nearly 54%, marking the largest annual gain since the late 1990s dot-com boom.
The "Ten Surprises" annual list was previously proposed by Byron Wien. Byron Wien is a long-time market strategist, and his annual "Ten Surprises" list, selected during his tenure at Blackstone Group and Morgan Stanley, has made him one of the most influential voices on Wall Street. Since 1986, Byron Wien's annual list of unexpected events has compiled potential market shocks that he believes have a higher probability of occurring than expected.
However, Wien passed away on October 25 at the age of 90. He served as a strategist on Wall Street for 38 years, providing profound insights into the economy, financial markets, and global affairs, and was still working at Blackstone before his death. His most famous contribution is the ten surprise list, a series of predictions he made at the beginning of each year for the past 38 years.Bank of America is also the latest company to pay tribute to this "Wall Street forecaster" by releasing their own version of the "2024 Potential Market Surprises" annual list.