What I’m Excited For In 2024

I have already published my predictions for 2023, and I stand by them as the most accurate and as-close-to-guaranteed outcomes as you will ever see.

My annual predictions have been so accurate over the years that I am stunned that I have not won some sort of award by now.

I have submitted my four picks for Investor Alley’s Best Stocks to Buy report and will also have picks for the Money Show’s annual booklet. I have no idea what next year will bring, so when asked to participate in these, I just pick a stock or two that is cheap and a stock or two that is strong. That is the equivalent of at least pocket jacks (a pair) as a starting hand, so I like my chances of delivering some winners.

As we enter this final month of the year, 2024 is shaping up to be fascinating, with all sorts of potential investable opportunities…

There are a few things I expect to happen in 2024, but I do not know when. While I view their probability as high, the one thing I have learned in over thirty years of doing this is that things change quickly in today’s world. But here are my best guesses at events that could be potential gamechangers:

• A Chinese invasion of Taiwan
• A fast-spreading hemorrhagic fever virus
• A full-blown war in the Middle East with massive damage to the oil fields
• The lengthy close of the Suez Canal

There is very little money to be made trying to predict what will happen in 2024, but fortunes can be made by reacting to what does happen. So here are some potential occurrences that, if they happen, could make you an enormous amount of money:

The first of these is the Federal Reserve ending this interest rate cycle. A period of “higher-for-longer” interest rates with no new hikes would be fantastic for fixed-income investors. If rates just stop going up, we can lock in long-term high yields by buying bonds issued by companies that have a very high probability of surviving until the bonds mature, with low price volatility. If you think as I do and only pay attention to the yield at purchase and the probability of getting paid at maturity, future hikes do not matter. As long as I collect my promised return, I could care less what the prices do in the interval between purchase and maturity.

This interest rate outcome is also wildly bullish for residential mortgage bonds. No more rate hikes mean that mortgage markets will stabilize, and new supply will increase modestly. Rates will be well above the boom year of zero interest rates, with little-to-no prepayment risk—after all, only significant changes in circumstance would lead a homeowner to swap a 3.75% mortgage for a 7.75% contract. Patient buyers who make short-term volatility work for them instead of against them could see spectacular returns from discounted mortgage-backed securities and the REITs that invest in them next year.

There is an above-average chance we’ll see a mild recession next year. I know the headlines have been screaming about a soft landing, but that is because both Wall Street and the financial media are obsessed with headlines and detest taking the time to actually read the data. A recession will turn fixed-income instruments like bonds—both taxable and tax-free—and mortgages into home-run investments that deliver returns that far outpace the stock indexes.

Stable or falling interest rates will play a role in a bottom forming in commercial real estate. It will probably be a messy bottom with lots of ugly headlines; however, the uglier the headlines, the more of an opportunity REITs will become for individual investors. Investors who accumulate quality REITs as the headlines scream “Disaster!” will make enormous amounts of money.

So will those who wait for as close to the point of maximum pessimism as possible—that point where friends and relatives question your sanity and you can taste the puke in the back of your mouth when you place your order to buy commercial mortgage REITs—will not only make a fortune, but they will also lock in a long-term source or almost embarrassingly high yields.

Israel.

Iran.

Ukraine.

The Fed.

The Election.

OPEC.

All of these and more have the potential to create enormous volatility in stocks, bonds, and commodities next year.

Investors who understand and can apply the philosophy of “Buy Low, Sell High” will put themselves in a position to reap massive long-term profits.

This post originally appeared at Investors Alley.

Category: Stocks