2 months ago • 2 mins
What’s going on here?
The global economy might’ve proved the pessimists wrong this year, but there’s reason to be wary of all-out optimism in 2024.
What does this mean?
The US is in better shape than this time last year, serving as inspiration for anyone who’s put away a few too many festive dinners. Inflation’s heading toward target, the Federal Reserve is probably done with interest rate hikes, and companies and consumers are holding steady. Added together, that makes a harsh recession less likely. If it stays that way, that’s good news for riskier assets like stocks and crypto, while defensive assets like bonds and gold could continue to benefit from falling interest rates.
But remember Warren Buffett’s words: “Be fearful when others are greedy, and greedy only when others are fearful.” When everyone’s optimistic, the market’s likely already accounted for the best-case scenario. That makes it vulnerable to any against-the-grain changes. And if the last two years taught us anything, it’s that markets tend to behave very differently from how investors expect. Let’s just hope it’s a pleasant surprise this time.
Why should I care?
For your portfolio: Trust issues.
Your best defense against uncertainty is diversification. You might consider stocks from different sectors and regions in case US tech loses its footing, say. Treasury bonds and gold could protect against a recession, while other commodities will likely hold their own if inflation reboots.
The bigger picture: Control the controllables.
Short-term investing can hinge on hindsight and luck. But over the long haul, it's the strength and consistency of your investment process that counts. That’s why it’s crucial to develop a system that guides you on precisely what to buy, what to avoid, and how much to invest in different situations. Develop a solid strategy for selling, too, outlining when to let go or hold on. Even plan ahead in anticipation of turbulent times or runaway markets. The more solid your strategy, the less you'll be swayed by emotions.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.