Interest Rates, Investments, and Innovation: A Look Ahead at 2024

Looking ahead, 2024 may have similarities and differences to 2023. Interest rates start the new year much higher than they were just 12 months ago. Going forward, the Federal Reserve may end its rate hiking cycle—or even cut rates in the back half of 2024. Meanwhile, a handful of large capitalization technology stocks continues to dominate the market, as technological innovation races ahead.  

Let’s peer into what 2024 may hold. 

The Fed May Change Direction.  

From March 2022 through July 2023, the Federal Reserve raised the short-term interest rate it controls 11 times from almost zero to the current range of 5.25% to 5.50%. Recent economic data has indicated that inflation is decelerating to levels that may allow the Federal Reserve to end its interest rate hiking cycle. Some economists are even predicting the Fed will start lowering interest rates in the second half of the new year.  

It can take upwards of a year to see the full impact that higher interest rates will have on the economy. So, we’ll be watching to see if economic growth can continue to muddle through and grow slowly or if it will dip into a mild recession. Either way, fixed income investments are far more attractive now, with the 10-year Treasury yielding about 4.4%, than they were in 2020 when yields were south of 1%.  

Magnificent 7 Remains Dominant 

As 2024 begins seven technology stocks—often referred to as the Magnificent Seven—continue to dominate the S&P 500’s performance. These stocks contribute roughly a third of the S&P 500’s market capitalization and they have some of the highest valuations in the market. The 10 largest stocks in the S&P 500 have a forward P/E (price/earnings ratio) of 27.8, while the remaining stocks in the index have a forward P/E of 16.3, according to research from JP Morgan. With this in mind, investors should consider increasing diversification within the large cap growth sector.   

Source: JP Morgan 

Innovation Marches On, Offering New Opportunities for Both Wealth and Health 

As long-term investors, we are always looking for trends that will play out for years to come. Many of these themes are in the technology sector where digital wallets, robots, and autonomous vehicles are just some of the innovations changing how we live and work.  

More recently, artificial intelligence has arrived on the scene. Using prompts from humans, ChatGPT and Bard can write stories and poems or produce videos and pictures. New technologies like AI and others rely on increasing amounts of computing power and energy. So, we’re also watching as semiconductors get smaller, faster, and more energy efficient. Semiconductors are the workhorses of the new economy.  

The increasing need for energy to power all of this technology brings us to the progress that scientists are making in developing green technologies that will reduce carbon dioxide in the atmosphere and keep global warming to a minimum. Solar panels and wind farms are producing renewable energy and reducing our dependance on fossil fuels. The green technology umbrella also includes the development of electric- and hydrogen-powered vehicles, which includes cars on the road today and perhaps trains, planes and ships sometime in the near future.  

Amazing innovations in healthcare are helping us live healthier, longer lives. More of us are wearing devices that can scan our heart rhythms, and in the future, they may be able to analyze our blood and other vital signs. New drugs are being developed using mRNA technology and scientists are getting closer every day to finding a cure for cancer.  

The hard work of scientists at home and abroad gives us hope that they will find solutions to the world’s toughest problems, in the new year and the years ahead. This will undoubtedly be accompanied by continued rapid change and some new challenges – but also many opportunities to improve our collective health, wealth and happiness. And on that optimistic note, we’d like to wish everyone a healthy and happy 2024.   

Weiss, Hale & Zahansky Strategic Wealth Advisors is an independent wealth management firm dedicated to empowering others to Live Well through our personalized Plan Well, Invest Well, Live Well.™ strategic process and a high-touch wealth management model that meets clients on their terms. To learn more or to schedule a complimentary consultation, call (860) 928-2341 or visit our website.  

Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.