There are times when people make predictions but they never bother to review them and own their mistakes, with that said I think my predictions for FY2024 are broadly accurate as I review them towards the end of Q1, obviously the calls are still in play and some (cough cough Japan) were misses so far.
Here is a link to my 24th December article Who Cares about the Past, its About the Future to consider the original thoughts in full.
1. Reverse Repo (“RRP”) is drained
In late 2023 the RRP sat at $772BN, it had fallen far from its peak of $2.55TN but my thinking was that it would continue to drain in line with the US Fiscal Deficit spending and New US Treasury Bills, Notes and Bonds issuing.
The RRP as of 6th March sits at $456BN, down $316BN or 40.9% from Dec 24th. Green Tick.
2. SPX will hit $5,500
The directional move was correct, when I wrote the article $SPX was $4,755 and we are sitting at the $5,100 level. We haven’t retested the $4,600 and we may never actually retest that low, but I would be cautious here for sure. Nothing goes up in a straight line. That said, the directional move was correct but we need the rest of the year to play out to determine if $5,500 will be achieved. Amber - needs more time.
3. YEN to Outperform Global Currencies
This has been my biggest surprise to be honest. There was late 2023 rally in the Yen after what could only be described as a terrible year for the currency in USD terms. I am expecting Bank of Japan to hike interest rates in Q2, but I was sure they would in Q1. This would attract investors to Japan and create a demand for its currency.
This is still very much in play, but I can’t mark it amber given the directional move was against me. USD/JPY was $142 back in Dec 2024 but sits at $148 today as I write. This call looks to be wide of the mark X - could still come around if BoJ commits to normalizing interest rates.
4. Fed will Cut Later than the Market Expects
This call has been my most accurate one and ties into the positive directional moves for equities in 2024. The SOFR Futures had priced in a 25bps Fed Funds Rate Cut in March but that has now been priced out a quarter to June 2024.
The Fed continue the positive narrative with a soft landing in play for them and with unemployment rates still low it is easy to support this narrative. Remember the Rate Cut will actually be the signal of Recession and the Market will try to be 6 months ahead of the economy. Green Tick
5. US Treasuries - Short End Yields to Fall while Long End Yields increase
This is extremely marginal and possible needs more time to play out. US6M rates moved from 5.31% to 5.35% from Dec to present day while the Long End represented best in the US20YR moved from 4.21% to 4.36% in the same period, but has risen above 4.5% this year. Amber score here - needs more time.
6. NASDAQ to Outperform SPX
$NDX is up 8.10% YTD as opposed to $SPX 7.58%. Its a lot closer than I thought but still outperforming. Just a reminder that the logic is that with Rates still higher, discounted cashflows will be less valuable than Growth Stocks which for the most part as based on distant future earnings as opposed to quarterly forward guidance at earnings. Green Tick (but only just)