What Could Go Wrong?
Author: Greg Valliere
June 18, 2024
THE STOCK MARKET is cruising along, but take a close look and it’s clear that this rally has been confined to just a handful of stocks. Perhaps more importantly, there’s a lot to worry about. We’re usually upbeat, but it strikes us that the market has overlooked anything negative, as follows:
1. AN ELECTION CRISIS: The winner may not be known in November, as the election heads to the courts and recounts, amid charges of fraud. The great wild card is a health issue — neither Joe Biden nor Donald Trump seem sharp, according to people who have spent time with them recently. A stumbling performance by either of them in the June 27 debate could scramble the race.
2. THE ECONOMY STUMBLES: Sometimes when the labor market softens, it comes quickly. Grouchy consumers have reduced their spending, and GDP growth could shift from good to mediocre by fall.
3. THE FED STAYS TOO TIGHT FOR TOO LONG: The Fed’s obsession with getting to an arbitrary inflation goal — 2% — could backfire. Central banks in Canada and Europe have acknowledged that an easier monetary policy is necessary; will the Fed wait too long?
4. UKRAINE AND THE MIDEAST STALL: Kyiv may stop the Russian advance this summer, but a Ukrainian breakthrough is unlikely. Hamas doesn’t seem to be interested in peace talks; a guerrilla war in Gaza is a very real threat. Iran and China will continue to destabilize the Mideast.
5. CLIMATE CHANGE TAKES A HUGE TOLL: There is no precedent in recorded history for the scorching heat in much of the world, which could fuel powerful hurricanes this fall. Widespread fires in California are virtually certain.
6. COMMERCIAL REAL ESTATE PLUNGES: This is a major economic wild card, as office workers stay at home and big cities face a glut of empty buildings.
BOTTOM LINE: The U.S. economy has been remarkably resilient, and that could continue, but our sense is that consumers may pull back until there’s political clarity and clear signs of lower inflation — and neither of those signals may come until winter.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
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