Time for My 2024 Crystal Ball

One of the most popular finance games when the New Year comes around is to make forecasts about the upcoming year. Most predictions don’t come to pass—the future is just too darn fickle.

However, it is the start of a new year, so I, too, will take a shot at some predictions.

Because some things do seem very likely, and will have huge consequences for us investors…

It seems pretty certain that the Federal Reserve will reduce its fed funds rate in 2024. Many pundits think the rate cuts could start as early as March. I suspect the Fed will wait a little longer and start cutting in May or June. Once the cuts start, look for the fed funds rate to come down quickly and be close to 3% by the end of the year.

This rate dictates short-term rates; it’s the markets that set long-term rates. The 10-year Treasury is already below 4%, and I don’t expect it to fall much further, resulting in a positive yield curve by the end of the year.

Historically, mortgage rates are priced at the 10-year Treasury plus 1.5% to 2.0%. With the 10-year currently at 3.8%, mortgage rates should soon be well below 6%.

Preferred stocks are a great way to earn high current yields and get share price appreciation as market yields and interest rates fall. The Virtus InfraCap U.S. Preferred Stock ETF (PFFA) pays monthly dividends and yields 9.%.

There will be a stock market correction in 2024, maybe more than one. A correction is official when one or more of the major market indexes declines by more than 10% from the most recent high mark. Ten percent doesn’t sound like much, but it feels like a lot when your account has dropped by that or more, and seems like it will keep going down.

Have a plan to take advantage of “stocks on sale” when we get into…

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