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How Will Equity Markets Perform in 2024? – By Joe Wiggins*

by | Investments, Markets, Offshore, Saving & Investing

It is that time again when many “investment professionals” make “predictions” about how various markets will perform over the coming 12 months. The only purpose seems to be to allow us to look back in a year’s time and comment on how pointless such endeavours are. Although it can be viewed as a harmless diversion, the big problem is that the pervasive culture of forecasting the unforecastable perpetuates damaging investor behaviour.

What are people trying to do?

When setting expectations for equity markets for the year ahead, it is important to understand what’s actually being done. In simple terms, equity returns have three drivers – changes in valuation, dividend payments and earnings growth. Over short horizons, it is often valuation changes (or what we might also call fluctuating sentiment) that dominate; whilst as the horizon extends it is cash flows and their growth that matter.

When we purport to forecast the year ahead, it is largely an exercise in trying to anticipate changes in sentiment. In essence, they are asking how “the market” (other investors) will react to future events. This is quite tricky!

If we are to get it right, what must we do?

If we are attempting to forecast equity market performance in 2024, we will need to do three things:

  • Identify known issues or developments that will influence investor sentiment in 2024 and accurately predict them. (For example, we would need to know both that the action of The Fed will be influential and how they will behave).
  • Identify unknown issues that will influence investor sentiment in 2024 and correctly forecast them. (This is – by definition – impossible).
  • Correctly foresee how markets will react to these known unknowns and unknown unknowns. (We don’t need to just get the events right, but the market’s reaction to them).

Although this may seem glib, it is not. It is exactly what is required to make such a forecast. It is a prediction of the market’s reaction to unpredictable events and events we haven’t even thought about. 

Given the improbability of meeting this challenge, why do so many people do it?
  • It’s expected: Unfortunately, the most persuasive reason is that such short-termism is an unshakeable industry standard. I have worked in investment markets for twenty years and when people ask me about what I expect ‘the market’ to do next year I can feel embarrassed saying “I have no idea”, even though it should be more embarrassing actually offering a confident forecast.
  • It’s their job: For many people, it is simply their job to produce such forecasts, whether they believe it has value or not.
  • They believe it: Presumably, some people believe there is merit in such forecasts, which I can only put down to overconfidence.
  • It’s fun: Predicting short-term equity market performance is enjoyable and engaging. People want to keep doing things that are interesting and might keep doing them even if it destroys value over the long run.
But what if we had to forecast equity market performance in 2024?

What would be the ‘right’ way to do it? Probably by looking at some base rates of historic one-year returns and perhaps adjusting those to reflect starting valuations. The final step would be to put some extraordinarily wide confidence intervals around the prediction, immediately rendering it pointless.

Why should people hold equities in their portfolios?

The truth is that most people owning equities should be doing so to capture long-run returns by investing in a collection of companies generating a rising stream of real cash flows through time. Attempts to predict how the market might be pricing those cash flows over any given period as short as a year is entirely fruitless and counterproductive.

Why is trying to accurately predict the impossible bad for investors?

This is not simply a case of more wildly inaccurate forecasts in financial markets, but another example of the incessant implicit encouragement of damaging investor behaviour. The more we see these types of predictions, the more people think that equity markets are somehow stable rather than noisy over the short-term, and that investing is about making short-run estimates of impossibly complex things.

How will equity markets perform in 2024? I have no idea.

* This article [slightly revised by us] was written by Joe Wiggins and first appeared at