Investors can expect a bull market encore amid continued economic resilience

Astrong January for global stocks has not silenced doubters. Bears say this bull market is definitively doomed, extending their 2023 arguments. They cite higher-for-longer interest rates, global economic malaise and escalating regional wars.

Wrong again. Markets move on what people do not widely know and watch – surprises, positive or negative.

This year, those surprises will be to the upside – shocking everyone again, like 2023.

Last year, world stocks boomed 23.8 per cent. Technology soared by 53.3 per cent, powering the tech-heavy S&P 500 index to rise by 26.3 per cent. Bonds rose broadly in a late surge.

This year, you can expect moderate double-digit gains for world stocks – as economic resilience and political tailwinds fuel a good to great year.

Technology and big growth should lead early before strength broadens mid-year in a value-led shift.

A sneaky truth about young bull markets: If they reach one year old – as this one did in October – they nearly always see a second birthday.

Despite fears, world gross domestic product expanded last year. GDP in the US accelerated for much of 2023 – to 4.9 per cent annually in the third quarter and 3.3 per cent in the fourth quarter. Full-year growth was 2.5 per cent, speeding from 2022. China’s 5.2 per cent full-year growth rejoined pre-Covid trendlines.

Eurozone recession did not happen – GDP was flat in the fourth quarter and climbed 0.2 per cent in 2023.

Inflation cooled big time. Despite December’s tiny rise, the world’s largest economy’s 3.4 per cent annual rate is nearing pre-coronavirus levels.

The US Federal Reserve’s targeted gauge – the headline personal consumption expenditures price index

– rose an annual 1.99 per cent over the six months up to December, just under the Fed’s 2 per cent target.

Eurozone prices slowed drastically to 2.8 per cent annually in December, down from October 2022’s 10.6 per cent peak.

US politics turbocharged the rise of global stocks in 2023, as late-2022’s US mid-term elections cemented gridlock – sweet music to markets.

Now comes a US presidential election year, which will be strong for stocks.

Gridlock extends globally. In the UK, deep internal divisions and an election due by 2025 – probably happening sooner – keep the government from doing much.

Japan’s government is teetering over a financial scandal – also a recipe for little action.

Spain’s flimsy coalition government clings to life as internal divides over amnesty for Catalan pro-independence leaders threaten a new vote.

The Netherlands still has no government after November’s election – too gridlocked to form one. Germany’s coalition bickers on budgets into inaction. France’s unpopular government faces more strikes and lacks political capital to pass anything big.

This global political landscape is endlessly noisy but largely devoid of big policy shifts. That extends the status quo worldwide – a reality stocks love.

Technology and other big global growth stocks should lead early in 2024 – tied to stilllow growth rates.

As resilient global economic growth becomes increasingly apparent later on and shortterm interest rates start falling relative to long rates, value stocks should lead.

Marginal lending increases always help value businesses most, given their weaker balance sheets and volatile, economically sensitive earnings flows render them more bank loan-dependent. They generally lack big growth companies’ fat gross operating margins that fund self-financed growth.

So, make offensive value stocks such as banks, industrials and energy your targets. Their economic sensitivity primes them to outperform.

Downplay defensive sectors and industries such as utilities, health care and consumer staples. They are great in downturns, tied to steady demand. But not in adolescent bull markets with warming sentiment.

So, expect a bull market encore in 2024.