10 Themes That Will Affect Your 2024 Investing

As a new year begins, Raymond James CIO Larry Adam serves up his outlook on the financial markets.

To read the full article, see the Investment Strategy Quarterly publication linked below.

On Top Chef, one of America’s most popular kitchen competition television shows, contestants walk in with knowledge and experience – but no idea what challenges they are about to face. Their goal is to prepare a dish that pleases the expert chefs judging them, but the judges toss in a mix of ingredients that no contestant would expect. The aspiring chefs must think on their feet, improvise and beat the clock.

Sound familiar? Not only was fast footwork the investment story in 2023, the competition is set to get stiffer in 2024. Here are our 10 themes for 2024. Count on more than a few surprise ingredients throughout the year to spice up the financial markets.

1. U.S. economy: "Rotisserie" cycles

The most talked about recession in history has yet to materialize. Many economists have stopped waiting for the delivery and have revised the menu. We still believe that a recession will start in 2Q, but it will likely be the mildest ever. Indeed, it may be so mild that markets barely notice it. We expect the recession to be mild because there are no excesses in the economy, and like a rotisserie oven, many parts of the economy have been rotating from hot to cold independently over the last few years. Even with a mild recession, a recovery by year end should help U.S. GDP warm to a ~1% growth rate for the entire year.

2. Monetary policy: Chairman Powell, the top chef

The Federal Reserve (Fed) is led by our favorite Top Chef: Jerome Powell. Under pressure to cool inflation, he served up a steady course of interest rate hikes over the last 18 months and whipped inflation from 9% to 3.1% currently. Since that restrictive diet is done, the Fed will turn its attention to fattening the economy as growth concerns mount (i.e., a modest rise in unemployment and a potential recession). Markets are salivating over the possibility of as many as six interest rate cuts in 2024, but we believe that is overly optimistic; we favor three or four. More rate cuts than that would likely mean the economy is struggling more than we anticipate.