In the year 2024, monetary policy is expected to play a significant role in shaping the stock market, with the American Federal Reserve Bank being a key determinant. Central banks have been navigating through uncertain territory since the onset of the Covid pandemic, with many unsure of how things will unfold in the future. The decisions made by central banks, particularly the Fed, are closely watched by professional investors.
According to a survey conducted by Bank of America, 52 percent of investment fund managers believe that the Fed will have the greatest impact on stock prices in 2024 as opposed to only 33 percent who feel that company profits will be the main driver of prices. John Plassard, an investment specialist at Bank Mirabaud, also sees monetary policy decisions as currently being the biggest risk for financial markets.
The Fed’s handling of inflation has been a point of contention, with initial assessments of inflation being deemed “temporary” leading to subsequent interest rate hikes. However, due to uncertainty caused by post-Covid data shortages and inflation rising to 2.7% in March, interest rates have been held steady for now. Despite this uncertainty surrounding monetary policy decisions, some investment experts consider a take-off scenario where economic growth picks up again despite ongoing interventions from central banks.
Looking ahead to 2024, national elections taking place in over 40 countries with a combined population of over 3 billion people could significantly impact market dynamics. While investors remain cautious about monetary policy decisions and their potential risks on stocks prices and market stability; they are advised not to be overly risk-averse and focus on diversifying their portfolios for better returns in this unpredictable environment.
