Time For My 2024 Crystal Ball
One of the most popular finance games when the New Year comes around is to make forecasts about the upcoming year. Most predictions don’t come to pass—the future is just too darn fickle.
However, it is the start of a new year, so I, too, will take a shot at some predictions.
Because some things do seem very likely, and will have huge consequences for us investors…
It seems pretty certain that the Federal Reserve will reduce its fed funds rate in 2024. Many pundits think the rate cuts could start as early as March. I suspect the Fed will wait a little longer and start cutting in May or June. Once the cuts start, look for the fed funds rate to come down quickly and be close to 3% by the end of the year.
This rate dictates short-term rates; it’s the markets that set long-term rates. The 10-year Treasury is already below 4%, and I don’t expect it to fall much further, resulting in a positive yield curve by the end of the year.
Historically, mortgage rates are priced at the 10-year Treasury plus 1.5% to 2.0%. With the 10-year currently at 3.8%, mortgage rates should soon be well below 6%.
Preferred stocks are a great way to earn high current yields and get share price appreciation as market yields and interest rates fall. The Virtus InfraCap U.S. Preferred Stock ETF (PFFA) pays monthly dividends and yields 9.%.
There will be a stock market correction in 2024, maybe more than one. A correction is official when one or more of the major market indexes declines by more than 10% from the most recent high mark. Ten percent doesn’t sound like much, but it feels like a lot when your account has dropped by that or more, and seems like it will keep going down.
Have a plan to take advantage of “stocks on sale” when we get into correction territory. My Dividend Hunter service focuses on building a high-yield income stream, and falling share prices present a great opportunity to average down the per-share cost and add shares at an above-average yield.
The stock market has recovered from every correction and bear market. Remember that so that you can profit and not panic when shares fall sharply at some point in the new year.
I want to share some words from Charlie Bilello’s recent Put These Charts on Your Wall…2023 Edition post:
The market doesn’t have to do anything, least of all what you think it should do. The market does what it wants, when it wants to do it. It is the real-time personification of collective human psychology, with fear and greed on full display.
That’s what makes it so hard and, at the same time so interesting. There are times when skepticism is warranted and other times when you need to suspend disbelief, with no manual to help you decipher which situation applies.
I look forward to watching my dividend income grow in 2024.
This post originally appeared at Investors Alley.
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