February 2024 - 2024, a year of kindness.

by Stephen Bennie 2024-02-13

In this article we look at some possible kind surprises for 2024.

If you like a spot of feng shui and harmony, then the year 2024 has a pleasant ring to it. It feels like a balanced number, with its 4 times table vibe; 20 and 24 go well together. They are also good ages to be, I’m pretty sure most readers would be happy to be 20 or 24 again. The previous best sounding year was 2020 but that did not play out well, pandemic and all, so fingers crossed this time the outcome matches the vibe. And of course, 2022 became the omni crisis year complete with wars and rampant inflation.

Another aspect of 2024 is that the Chinese zodiac of the year is the Dragon. It is reputed to be a year of good fortune for all but for that to occur the dragon needs people to be kind and compassionate to each other, or so the myth has it.

With that in mind I thought I would address some possible kind and good news events that might be coming our way over the next 11 months. Some of these calls could be viewed as non-consensus while some I think are a better chance, readers can judge for themselves which camp each falls into.

The United States Presidential Election is ultimately a comfortable win for Biden. A kind and gentle year can only really have this outcome and it wouldn’t be dreadful for share market sentiment, status quo tends to be a useful backdrop for the markets.

The New Zealand dollar rallies to over 70 cents against the United States dollar. This is not all good (it hurts exporters) but it would ease some of the cost of living crisis in New Zealand, as our imported goods should get slightly less expensive. It would also allow us to travel overseas with a few more foreign money in our pockets, never a bad development.

Major central banks do not cut rates in 2024. This would potentially be a positive development. It would match a goldilocks scenario, as we would be seeing economic growth remain positive through the year. The flipside would be that this scenario would occur if inflation was remaining in a 3-5% range, above most banks’ target level but certainly not dangerously elevated. As an aside I think this is a good chance of being an accurate non-consensus call. In my opinion, central bankers were culpable in the creation of inflation with interest rates too low for too long. I believe they are currently super careful about avoiding another such mistake and easing rates too soon could create a calamity. The last two major inflationary episodes had a major second wave, particularly the 1970s. No one wants a repeat of that.

A chart that central bankers are surely keenly aware of

Source: Bloomberg

Peace breaks out around the globe in 2024. A kinder year would see ceasefire in Gaza and Ukraine. And obviously a zen year has no new major conflicts kicking off. This would have a number of positive flow throughs as supply and travel logistic issues would be eased in a more peaceful world.

No freak weather events in New Zealand. We enjoy a year of quiet normal weather. No floods, no droughts just regular weather. Sadly, I’m not a climate change denier, so this feels like one of my most stretched kind predictions.

Fletcher Building do not make any more write-downs. Well, this was always a very optimistic kind prediction and has already failed to last even until this article was finished.

Synlait Milk sort out their balance sheet without a deeply discounted rights issue. This is a personal and hopeful kinder prediction. Since we built a position in Synlait two years ago it has been one way traffic, in the wrong direction. A little kindness for us would be an asset sale that sorts the balance sheet and leaves the company with a decent war chest of cash to grow its nutritional business.

After many years of close calls, a cure for cancer is found. This would make any year feel a whole lot kinder.

Under Scott Robertson the All Blacks enjoy a perfect and comprehensive winning season. This one might be leaving Kiwi rugby fans a little rueful though, as it would give you a sense that we could well have won the World Cup if Razor had been at the helm.

Emerging market and small cap equities have a great 2024. This will only happen if a number of other kind predictions come to pass. Peace and tranquillity are a good back drop for both of these classes of equities. They tend to be avoided when investors are worried about risks such as escalating wars and out of control inflation. If 2024 does turn out to be a year of kindness it will be good for emerging market and small caps, and frankly after a few tough years, they are well overdue a break.
New Zealand enjoys its most successful ever Olympic games at Paris. It’s a great time when a host of brand-new sporting heroes are created. It gives the nation a positive buzz which would be great to experience.

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