A report from UBS’s global equity strategy team, led by Andrew Garthwaite, outlined ten potential surprises for financial markets in 2024. These predictions span across sectors, including technology, geopolitics and the global economy, providing insight into unexpected market turns . could hire in the next year.
AI-driven growth in the S&P 500 Index
One of UBS’s most extraordinary predictions is the potential for a 20% increase in price S&P500, driven primarily by advances in generative artificial intelligence (AI). This optimism is based on the ability of artificial intelligence to significantly increase productivity, mirroring the impact of the information communications technology revolution of the late 1990s.
The report suggests that AI could boost productivity growth to 2.5%, a notable increase from the current Federal Reserve and the 1.5% hypothesis of UBS economists. Subsequently, such a jump in productivity could lead to lower inflation and unemployment rates, allowing for faster interest rate cuts by the central bank.
Furthermore, UBS predicts that the ripple effects of AI on the market could lead to a rally in stocks, with a potential upside of 17% if these productivity gains materialize over three years. This prediction is underlined by recent market movements and earnings reports, such as that of Nvidia, which have already demonstrated the market’s sensitivity to the promises of artificial intelligence.
Geopolitical changes and economic adjustments
THE UBS The team also predicts significant geopolitical and economic changes, including the potential end of the war in Ukraine. Such a development would likely drive gas prices lower, benefiting European chemical companies and the broader economy. The report highlights the possible need for a modern equivalent of the Marshall Plan to help Ukraine’s reconstruction, which would benefit certain sectors, such as cement and capital goods companies.
UBS also suggests a slowdown in China’s nominal GDP growth to 3%, contrary to the acceleration many expect. Given China’s significant role, this slowdown could have far-reaching implications for the global economy. Furthermore, the report assumes a steepening of the yield curve and the possibility of a candidate other than the current favorites winning the November elections, adding uncertainty to the economic outlook.
Potential downfalls and surprises
Among the more specific forecasts, UBS hypothesizes a significant decline Apple, with its market capitalization potentially declining due to various headwinds. These include the mature smartphone cycle, the absence of a foldable product line or a clear AI strategy, and geopolitical and economic challenges in China. This potential drop in Apple’s market value is notable, given that the company currently trades at a “multiple of software,” despite the majority of its revenue coming from hardware.
The report also touches on the broader implications of these surprises on the market and economy. For example, the impact of artificial intelligence on productivity and productivity stock marketThis could be a double-edged sword, with significant benefits for investors and industries that leverage AI effectively and potential disruption and adjustments for those that don’t.
UBS’s forecast for 2024 also offers a glimpse into potential high-impact events and developments that could influence financial markets and the global economy. Although these surprises are considered long-term, their potential to significantly influence market dynamics and investment strategies cannot be underestimated. As a result, investors and policymakers may find it useful to consider these scenarios as they navigate the uncertainties of next year.
