From Fortune:

2024 has begun with a slight downturn in financial markets, with the Nasdaq Composite falling more than 1.5% in the first two days of trading after a surge in 2023. Three key reasons for the drop were highlighted by Capital Economics’ deputy chief markets economist, including natural consolidation after big gains, fears over a ‘less favorable’ outlook from central banks, and disruptions from shipping routes in the Red Sea.

Stocks are down in the new year due to a period of consolidation after last year’s surge, according to Infrastructure Capital Management’s CEO Jay Hatfield who pointed out the tax advantages of taking profits in the new year are impacting trader psychology. Despite the recent downturn, Hatfield’s bullish outlook for stocks “remains intact.”

Capital Economics’ Goltermann fears that investors celebrating the end of the Federal Reserve’s interest rate hiking campaign in December may have been surprised by more hawkish rhetoric from Fed officials this week. Recent comments by Richmond Fed president Thomas Barkin suggest that rate cuts may not be imminent, which could weigh on stocks.

Tensions in the Middle East due to Israel’s bombing campaign in Gaza and Houthi attacks on cargo vessels in the Red Sea are sparking concerns about global supply chain disruptions and renewed inflation fears. Despite this, Capital Economics’ Goltermann believes that the threats won’t lead to significant implications for the global economic outlook or change the bullish outlook for stocks.

Despite concerns over fears of central bank policy and the Red Sea crisis, Capital Economics’ Goltermann believes that the overall picture remains constructive for both bonds and equities. He remains bullish on stocks and anticipates that the shift towards less restrictive monetary policy will be the dominant theme of 2024.



Read more: Why are stocks down in early 2024? It’s a ‘hangover’ for 3 reasons, Capital Economics says