Everything Rally Due for a Mean Reversion Reality Check in 2024
A monitor displays a Bitcoin news headline on the floor of the New York Stock Exchange (NYSE) in New York, US, on Monday, Dec. 4, 2023, an asset indicative of the ebullient mood. Even so, stocks have treaded water this month after November’s blockbuster rally. But 2023 was good for stocks. And bonds have been doing well of late too.
Photographer: Michael Nagle/BloombergWe are about five years on from the apogee for returns in a super-cycle for stocks. Despite a stellar 2023, real returns have continued to moderate this year. In 2024, that trend should continue. And while stocks can still eke out gains for the year if the economy holds, recent soft- landing euphoria suggests a recession would increase the odds of large equity losses.
That’s how I described the outlook for 2023 exactly a year ago. And while that sounds right a year later, the gains have simply been too large. What I thought would be a US economy that was more resilient than the consensus anticipated has been joined at the hip by receding benchmark Treasury yields. This combination has fueled an Everything Rally built on euphoria instead of the sober-minded pragmatism I thought 2022’s rout would usher in.