May 20, 2024
Investors

Forget Ukraine and Israel – investors won’t see these risks coming in 2024


Trader

What pessimists fail to see is that high-profile global events are already priced in by markets – Jason Alden/Bloomberg News

Ken Fisher founded Fisher Investments and built a fortune estimated at $6.3bn. He writes a monthly column for Telegraph Money

Surprises have the most sway over stocks – both positive and negative.

My 2024 forecast suggested that pessimists, fixated on issues like the cost of living and wars in Ukraine and Israel and Gaza, would be shocked by double-digit bull market gains. So far so good, with world markets soaring 9.9pc in the past few months.

What those pessimists failed to see, however, is that high-profile global events are already priced in by markets.

The biggest threats to markets are economically significant events which have crept upon us broadly unseen. Sometimes this is because lofty sentiment encourages most investors to overlook elephants in the room. Sometimes there are true shocks.

There are several potential surprises I am monitoring for later in 2024 and into 2025.

While Ukraine and the Middle East are huge human tragedies, neither are greatly economically significant, and they are both already well known to markets. Similarly, the tensions between Taiwan and China are no more elevated now than in the past.

But risks from the nuclear armed triangle of China, India and Pakistan still fly under most investors’ radar. Historical border skirmishes, conflicting religions and cultures (a duo which can often create tension) and competing economies and politics keep tensions simmering.

Pakistan saw its GDP plunge last year, whilst inflation soared 30pc and government debt ballooned. There is also plenty of political uncertainty around incarcerated former prime minister Imran Khan, with his conviction appeal, which could further destabilise Pakistan, pending.

In China, President Xi’s increasingly endless new economic restrictions mean the country’s “miraculous” past growth is finished. Meanwhile, India stews enviously as China favours its regional neighbour Pakistan. China sees initiatives like India’s boost to Himalayan infrastructure as infringing on disputed land.

The odds of war aren’t high, but they aren’t tiny, either. And it could embroil the world’s two most populous states – and its second and fifth largest economies.

Indian Army soldiers demonstrate positioning of a Bofors gun at Penga Teng Tso ahead of Tawang, near the Line of Actual Control (LAC), neighbouring ChinaIndian Army soldiers demonstrate positioning of a Bofors gun at Penga Teng Tso ahead of Tawang, near the Line of Actual Control (LAC), neighbouring China

Risks from growing tensions along the India-China border still fly under most investors’ radar – Money Sharma/AFP

Whilst cryptocurrencies themselves are too small to hit the broader economy, devils in the details could affect non-crypto assets.

Two high-profile crypto bosses have faced investigation, with prison time for FTX’s Sam Bankman-Fried and charges against the CEO of Binance. And changes to rules for Bitcoin in the US and EU are likely to lead to more rulemaking. Even well-intended rules can carry unintended consequences.

An excessively punitive approach to AI could also stymie innovation and growth. The UK and EU approaches seem manageable in principle, but the G7’s plan could still spark explosive outcomes.

One more potential surprise hidden in plain sight: politics. This year is the biggest year for elections in history, but I am not talking about vote-counting – I’m talking about lawmaking.

With America’s Congress gridlocked, I don’t anticipate the passing of many economically significant bills this year, but newly-elected presidents always try to cram in signature laws early in their terms – before their popularity fades. Markets are much more variable early in presidents’ terms than late.

A victory for former President Donald Trump, who slightly leads in polls at the moment, might get investors excited over tax cuts or deregulation. But this could tee up disappointment if those moves do not materialise.

With no election date on the cards in Britain, it’s too soon to sweat over what the legislative agenda may throw at investors on this side of the pond.

I still remain bullish for 2024. But risks always exist. I’ve done my best to imagine some of the potential surprises investors face – but the biggest risk of all?

The one that no one saw coming.

Recommended

Cheer up – the bull market will run for another year (at least)

Read more

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 3 months with unlimited access to our award-winning website, exclusive app, money-saving offers and more.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *