Market Cycles: What Could Happen in 2024?

Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Friday from 11am ET, as our risk management educator.

With 30 years’ experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading.

Below are some excerpts of Bob’s thoughts from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here.

Which economic regime do you anticipate we’ll encounter in during 2024?

My personal feeling is that 2024 is going to be a ‘reflation regime’. The best performing sectors in a reflationary scenario are typically energy, basic materials, technology, industrials, and communications. This is historically. The leading component is energy and one of the lower components, that is still positive, (in growth) is healthcare – I think that might perform a little bit better this year.

Now, all of this is dependent on the Federal Reserve. Currently the market has six rate cuts priced in for 2024 – I think there’s no way that happens – especially in a reflationary scenario.

In this case, we would experience faster growth and faster inflation, so what could possible drive the Federal Reserve to cut rates? Nothing.

What are the risks of going long and short in the market in 2024?

One thing that will make the market rally is going to be six rate cuts. What’s your risk if your short there? The six rate cuts. If we get those six rate cuts the market is likely to continue higher, mainly because it will anticipate more.

The problem with that theory, though, is that if the Federal Reserve is cutting six times it means we’re likely heading for a recession. This is not good in the early stages for stocks. It would place us in this regime here (deflation) where consumer staples, utilities, and healthcare sectors (historically) lead.

Equities could rise higher, if the Federal Reserve cuts rates, but you need to wonder how long that can last.

What are the two least likely scenarios (economic regimes) for 2024?

I would say ‘early recovery’ and ‘stagflation’ are the least likely scenarios. Slower growth and faster inflation are not likely – simply because the Federal Reserve is still holding higher rates to push inflation down and growth is still showing its head. Could it develop into this (economic regime) sure, but it’s one of the least likely. stagflation was my call in the middle of 2023 for this year but it no longer it is. In terms of early recovery: slower inflation and faster growth – this is not very likely. This is because wages are still growing at a fast clip, which is not likely to assist in slower growth or inflation.

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