Fearless Forecast 2024 Part II – Bonds, Gold, Oil, Bitcoin, Economy, Fed & Election

I am going to continue with my 2024 Fearless Forecast in piecemeal fashion and then post one very long blog for posterity.

Fixed Income

I don’t think 2024 will be a big year for bonds in either direction. Let’s start right there. Overall, I think they are in a trading range bound by 2023 high and low. If I was forced to offer a scenario for the year, I would say that bonds are weaker earlier in the year and stronger later in the year. It should be a good strategy to buy weakness and sell strength in treasuries and investment grade corporates. On the shortest end of the curve, I would absolutely buy into the fat spot on the treasury bill curve which rests between 13 and 26 weeks.

Gold

I was super bullish on gold 12 months ago, calling for all-time highs. And while I think the late comers need to be punished, a common theme of mine, the bull market in gold lives in to see $2500. Gold bull markets usually with a bang and not a whimper. The interesting part of the metals sector could be silver if it ever gets going.

Oil

I am old enough to remember Jim Cramer labeling oil as “uninvestable” the day it closed at -$38 a barrel when COVID fear roared. That was the week I called oil companies in CT to pre-buy as much oil as they would sell me and shared that on the blog. Oil is uninspiring heading into 2024. I called the peak at $130 in real time right here almost two years ago but there is nothing in its behavior today that gives me a high conviction play. For 2024, I think you can buy oil in the high $50s to low $60s, but do not overstay your welcome. I would be a seller on moves into the high $70s to low $80s which is no certainty it gets there.

Economy

Rumors of its demise continue to be greatly exaggerated, to paraphrase the great Mark Twain. I thought a mild recession would hit in 2023 as the yield curve strained lending and the economy. The yield curve (difference between a long-term interest rate and short-term rate) is now inverted for the longest period and the greatest depth. Historically, that leads to a guaranteed recession within 24 months. That clock runs out in 2024. And there are a number of other studies like the yield curve which all point to recession and run out in the first few months of 2024. This year will certainly test the theory that COVID structurally changed the economy so these trieds and trues are no longer accurate predictors.

Yes. Everyone knows that the consumer is tapped and stretched. Credit card debt now tops $1 trillion. Both auto and credit card delinquencies are building. Manufacturing has really slowed. Companies are starting to reduce headcount. Inflation is controlled, but will not get back to the Fed’s 2% without recession. No secrets anywhere.

However, let’s remember that it’s an election year and the government will typically do everything it can to juice the economy. Incumbents do not win with a weak economy. We already see the massive amounts of government stimulus in the economy that was passed by Congress over the last few years. Recession is coming, but the economy hangs on until at least late Q3 so that nothing is declared until well after the election and likely into 2025.

Fed

I think it’s commonplace that if Donald Trump is once again elected president, Fed Chair Jay Powell will be terminated. While I am no fan of Powell, I do not think it would be right or appropriate for a sitting president to fire his Fed Chair. Regarding things more important than this, I think pundits and investors are on serious drugs if they think the FOMC is going to reduce interest rates 6 or 7 times in 2024.

Unless there is a major geopolitical event, I will take the “under” in a huge way for 2024. 6 or 7 rate cuts means there is some kind of economic catastrophe which I do not see. I also believe that the Fed won’t risk reigniting inflation with premature cuts. Powell et al have already said time and time again that they will risk recession to get inflation under wraps. And inflation remains sticky between 3% and 4%. In 2024, the Fed moves the goalpost to 3% as a temporary measure.

Bitcoin

I guess I don’t have to forecast that the first Bitcoin ETF will be approved by the SEC as there are 11 at the time of this writing. Last year, I saw Bitcoin at least doubling. That was easy. Few forecast anything on the upside. For 2024 I don’t see the upside fireworks coming again. The deluge of new products should cap the rally for a while and another bout of strength doesn’t come until the second half of the year when $50,000 is exceeded.

Geopolitical

It is certainly going to be a year to remember, something I said in 2020 and 2016 as well. After the 2022 midterms I said there was a puncher’s chance that neither Biden nor Trump were on the ticket. That’s not looking so good right now, but I still would not rule out Joe Biden stepping aside if his poll numbers do not improve under the cover of a health scare. There could be a whole host of reasons why Donal Trump isn’t on the ticket, including his legal woes as well as a few shocking primary victories for Nikki Haley. At this point the odds do favor both men being their party’s nominee in which case Biden beats Trump in a rematch,  but the Senate flips to the GOP and the House remains red by a small margin. The epitome of divided government which markets will absolutely love.

2024 has many elections around the world and the U.S. media tends to downplay their importance. This year will have huge and far reaching consequences as the situations in Israel, Ukraine, Taiwan and the rest of the Middle East continue to be hot.

Bonuses

I am usually wrong with these because they’re often my teams, but that won’t stop me from opining anyway. Give me the Bills and 49ers in the Super Bowl. My Cowboys and Jets have disappointed again. For the first time since 2007 with the Florida Gators, I will take the UCONN Huskies to win back to back men’s national championships in Arizona on April 8th. After an enormous winter spending spree the New York Yankees, on the other hand, disappoint yet again and fail to reach the World Series.

On a personal note with 100% certainly I forecast that I will spend a lot less time on the road in 2024 versus the 90 or so days I did in 2023. I also forecast that my wedge game on the golf course will finally improve!

On Friday we bought RYPMX, PMPIX. We sold SSO, some SPHB and some ITB. On Tuesday we sold SPHB, RYPMX, PMPIX, some JPM, some DXHYX and some levered NDX.