2024: Navigating the Financial Frontier Ahead

Markets reflect the economic and geopolitical landscapes, which remain highly uncertain as we move towards the New Year.

The December FOMC meeting told markets the central bank is done tightening credit, and rate cuts could be on the horizon in 2024. The pivot from a hawkish to a dovish monetary policy approach is primarily bullish for asset prices. Meanwhile, geopolitics remains highly uncertain. Wars in Ukraine and the Middle East, the bifurcation of the world’s nuclear powers, and a highly contentious U.S. election will keep investors and traders on their toes over the coming year. The most significant price volatility tends to come from unexpected events.

As we move into 2024, several sectors could see significant appreciation, given the current investment and trading environments.

Military spending worldwide will rise

• The Doomsday Clock is at the closest level to a worldwide catastrophe in history at ninety seconds to midnight.
• Strained relations between the world’s nuclear powers will cause military spending to rise.
• Defense stocks and related ETFs could rise as defense contracts benefit from the growing friction.
• Boeing, RTX, General Dynamics, Lockheed Marcin, Northrup Grumman, and other U.S. defense contractors will likely profit over the coming year.

 OPEC+ controls oil prices

• OPEC+ rolled production quotas into 2024 and made additional cuts “voluntary.”
• S. energy policy continues to allow OPEC+ to control worldwide crude oil prices through 2024.
• Saudi Arabia needs $80 per barrel crude oil to balance its domestic budget.
• Russia and Iran require the highest possible oil prices to fund their economies and military operations.
• BNO is the Brent crude oil ETF and USO tracks NYMEX WTI crude oil prices.

 The U.S. administration could embrace pot as an election ploy

• The 2024 Presidential election will be another nail-biter.
• Incumbent President Biden has the lowest approval ratings in history.
• Former President Trump faces 91 felony charges with trials in multiple state and federal jurisdictions.
• The incumbent President and Democrats may use federal marijuana legislation to attract votes.
• CURL and TLRY would likely rally if the U.S. legalized recreational marijuana, as it would open banking lines and financing channels.

 Feeding and powering the world is critical

• The world’s population has grown to over eight billion.
• More mouths to feed increase the demand side of the equation for agricultural commodities.
• Agricultural commodities are increasingly fueling the world as biofuels are agricultural products.
• DBA owns a portfolio of agricultural futures contracts.
• Archer Daniels and Bunge Ltd. are leading agricultural processing companies and are the two publicly traded ABCD companies, as Cargill and Dreyfus are privately held firms.

 A BRICS currency would threaten the U.S. dollar’s dominance

• The bifurcation of the world’s nuclear powers has significant economic ramifications for supply chains and currency markets.
• Sanctions on Russia have caused Russian allies to seek alternatives to the U.S. dollar.
• The odds of a BRICS bloc currency to challenge the U.S. currency’s dominant role have increased.
• A BRICS currency could have gold backing.
• Gold tends to rise when the value of the U.S. dollar in the global financial system falls. GLD is the leading gold bullion ETF product.
• If the U.S. dollar declines against other reserve currencies, the UDN ETF will rise as it is a bearish dollar index ETF.
  
  Fasten your seatbelts for action in markets across all asset classes in 2024. As always, the most dramatic moves will come from unanticipated events, as markets hate surprises. Happy New Year to all!

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!