Reflecting back on 2024, it’s evident that a myriad of significant events unfolded. While pinning down every key occurrence is challenging, the wisdom gained from these experiences should guide our investment strategies as we navigate new developments.
This year served as a learning curve, offering several critical insights for TKer. A notable observation is that while major news media excel in accuracy, the information they present can sometimes lead to misconceptions. Over years of extensive news consumption, I’ve identified three types of accurately reported facts that can be misleading: an incorrect source that is quoted accurately, a true statistic that misses essential context, and an anecdote that’s true but doesn’t represent the whole picture. The takeaway? Always pair reported news with context and verification.
The paradox of the markets and economy is that they can simultaneously present conditions that are both worsening and improving. This confusion often arises because terms like “worse” and “better” are relative, while “good” and “bad” are definite. Consider recovering from the flu—feeling better is not synonymous with feeling good. In finance, absolute terms like “size” and “growth” are often described with relative terms like “growing,” “shrinking,” “accelerating,” or “decelerating.” Respectively, the complexity deepens when new data gets compared to analyst forecasts—a metric might appear positive and ascending, yet still fall short of expectations.
Thus, not every disappointing metric should be deemed negative. Watch out for headline stress on relative indicators. Lessons also unfolded the hard way for those relying heavily on indicators like the yield curve and the Conference Board’s Leading Economic Index, which faltered in accurately predicting recessions recently. This was foreseen by many who noted other robust data signaling continued economic growth. Our ample access to economic metrics—from jobs and manufacturing to spending and sentiment—allows for cross-verifying signals from any single indicator. Hence, it’s prudent to distrust a lone metric’s signal.
In investing, timeframes are crucial. Different individuals pursue varying strategies, from short-term market trading to long-term wealth building or a mix of both. Therefore, when seeking expert opinions, the first question should be about their timeframe focus. Someone pessimistic about short-term market falls may still hold an optimistic view over several years. Most Wall Street strategists forecasting a dip in the S&P 500 within the next year likely predict a significant rise in three to five years. To take expert opinions to heart, always clarify their relevant timeframe.
On the topic of stock splits, though theoretically neutral to a company’s fundamentals, they can suggest management’s confidence in future prospects, potentially elevating market value in the ensuing months and years. History shows companies announcing splits often outperform the market. In 2024, despite ongoing economic expansion, job growth, and cooling inflation—undeniable hard data—sentiment often lagged these realities. Negative narratives driven by politics or skewed media sometimes overshadow tangible improvements.
Hence, the focus should be on actual developments affecting earnings, which predominantly steer long-term stock performance—not sentiment. Economic figures can be like a Monet painting: cohesive from afar but chaotic up close. Amid incessant data and position shifts by anxious investors, trend endings and emergent narratives only crystallize with hindsight. A month’s unexpected data doesn’t necessarily signal seismic change.
Despite its tendency towards increases, negative market stories proliferate due to people’s preference for bad news or because of frequent down days (47% of trading days). Therefore, news coverage can appear disproportionately negative. Simply put, daily focus can distort the longer-term upward trajectory. Rising interest rates illustrate potential dual impacts. While generally considered adverse, fixed-rate debt holders with cash earning variable interest might actually see net benefits.
Every development bears pros and cons, often counterintuitively balanced, emphasizing the necessity of context, backed by concurrent data and historical comparisons. Reviewing last week’s key economic shifts: as expected, the Fed cut rates again, opting for cautious projections into 2025 and beyond. Inflation metrics are stable, hovering around the Fed’s aim, granting policy flexibility amidst economic changes.
Consumer spending remains robust, evidenced by heightened retail activity and elevated card spending data. Employment metrics signal sustained growth, with unemployment claims declining. Market dynamics show mixed shifts with ongoing interest rate adjustments affecting mortgage rates. Most homeowners, shielded by fixed-rate mortgages, remain unaffected by these fluctuations.
Real estate moved upward, with notable rises in home sales and prices. Likewise, industrial activity sees slight variations while services thrive, driving GDP growth to an estimated 3.1% in Q4. Despite short-term uncertainties, the stock market’s long-term prospects appear promising, fostered by operating leverage achievements post-pandemic.
The narrative isn’t without its risks—political, geopolitical, and economic—but historically, long-term market resilience prevails amid adversity. Though upcoming obstacles are inevitable, their transient effects shouldn’t overshadow the consistent long-game outlook that investors can reliably count on.
