We looked back at summarizing 2023 in the last one..here's one with 3 Predictions (each) for Markets and AI for 2024: ✦ Markets: 1. Interest Rate Plateau, Not Plunge: S&P 500 rose ~14% in last 2 months of 2023. This ride up was driven by the realization that soft landing has happened. While 6 Fed cuts are now priced in, I predict Fed won't be as aggressive. Barring a sudden downturn, nominal rates will plateau in the 3.5-4.5% range, even with sub-3% inflation. Expect some market bumps as expectations adjust, but with that said.. 2. Markets post a decent year (Up 5-10%): Valuations aren’t cheap right now, but a goldilocks economy can sustain valuations higher – the rise in prices will just bank more on the earnings part of the equation. (More on specific sector/co. predictions separately). Fundstrat Global Advisors’ Tom Lee points out how since 1937, the highest P/E is realized when yields are b/n 3.5% and 5.5%. When between 4% to 5%, P/E is >18X 65% of the instances. 3. Commodities will find footing or do better: After sharp declines in 2023, a soft-landing scenario should stabilize commodities. Energy and base metals, along with related equities (think XLE), are poised for a better year. This is related to how inflation may keep Fed anxious => slower rate cuts. ✦ AI: 1. Value Migration: Beyond the Hype Machine: 2023 was the year of AI boom – valuations were mostly snatched up by startups, semiconductor designers, and big tech. While that will continue (no signs of a bubble yet), 2024 will mark a shift: value will start diffusing across sectors, with early adopters within industries taking center stage. Think of how internet start ups snatched most value during the dot com bubble, but over time other sectors gained an internet-first premium or a sense of irrelevance based on adoption (the difference for example for a retailer becoming truly omnichannel vs going out of business). Proprietary use cases and specialized models will be the winning hand. 2. Hardware will get an AI boost: Access to powerful AI is about to get easier. On-device AI processing chips will be integrated into phones, laptops, and desktops, making AI more accessible and user-friendly. New devices will feature dedicated AI launch buttons, revitalizing the hardware industry while simplifying user onboarding. 3. Beyond Words: The Multimodal Revolution: Comprehension of LLMs is still pretty limited. It can read and generate text – but human comprehension goes much beyond that. 2024 will bring the rise of the multimodal LLM, capable of understanding and generating across image, video, and mixed media. You could feed anything and expect everything, and vica-versa. Use cases will explode accordingly. -- What do you agree/disagree with? What are your top predictions for 2024? Chime in here or on socials..
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Author noteSunny is a published market commentator. All takes are his own and not financial advice. ArchivesCategories |