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breadwinner1

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19/02/24

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Post #: 72475018
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Originally posted by Tarvold: ↑

Some reasons for confidence when investing in global share markets during 2024
Inflation is dropping back down to target. In the US it reached 9.1% in June 2022 but has since been tracking back to its 2.0% target, reaching 3.4% in December, after trade flows eased following the pandemic and labour markets normalised.
Interest rates are expected to start falling later this year across the major developed economies (except Japan) as inflation eases. We may well be moving into a period when the neutral rate of interest is higher than in the last decade, but lower rates should support share prices.
Consumers are still spending, supporting retail sales and broader economic activity, especially in the services sector. This reflects savings accumulated during Covid, with households being less over-extended than at the end of previous economic cycles.
International travel is returning to normal as airlines (gradually) rebuild capacity. This supports consumer spending more broadly, especially benefitting hotel groups, live entertainment businesses and luxury goods houses.
The global economy is still growing. The OECD expects this to ease from a projected 2.9% in 2023 to 2.7% in 2024, before starting to re-accelerate next year. This is consistent with a soft landing as inflation returns to target levels without the need for interest rates that deliver unemployment levels high enough to crush consumer spending and business investment.
Generative AI is reshaping the global economy in a similar fashion to earlier adoption of the personal computer, internet and smartphone. Certain companies are seeing a quantum expansion of their total addressable markets, bringing structural shifts in earnings.
We have entered a new period of innovation as a broader swathe of companies exposed to electrification, automation, onshoring and medical breakthroughs invest heavily in the markets of the future. This will support near-term demand even if interest rates remain elevated and consumer spending slows for a while.
Last year’s equity rally was unusually narrow, bringing the opportunity for a broader share market recovery this year. This doesn’t mean that companies in the fastest growing markets became overvalued, but many stocks are yet to fully participate in the share price recovery.
Companies now face easier financial conditions as expectations of lower interest rates have reduced yields on longer-term bonds. As these feed through into lower borrowing costs they should support profitability and companies will start to invest more.
The discount at which global smaller companies are valued relative to larger stocks is at an historic high. Smaller companies can take decisions more quickly, better manage inventories, control costs and exploit new opportunities to grow earnings. This enables them to outperform as the economic recovery broadens, typically six months or so after interest rates peak.

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The soft landing narrative.
The only problem for us bears is how long can they keep pushing this BS, before it's obvious a soft landing is impossible.
Don't fight the Fed!
Value at posting: 2,958.8
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BBUS, page-14267

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BBUS, page-14267

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