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The 2 risks Wall Street is ignoring for 2024

Wall Street's euphoria over interest rate cuts in 2024 – as indicated by the Fed dot plot – could mislead investors.
Fundstrat strategist Tom Lee raised the warning about next year's stock prospects.
In an interview with CNBC, the expert cited 2 risks of instability for the financial markets, which have so far been underestimated by forecasts.
Volatility could still hit the indices that have skyrocketed in these last days of trading.
The investor climate is, in fact, decidedly optimistic.
Wall Street rallied this week after the Federal Reserve admitted on Wednesday that its efforts to contain inflation are working and pointed to three interest rate cuts expected in 2024.
November retail sales data, which Thursday came out stronger than expected, after this week's "colder" inflation numbers raised hopes that the Federal Reserve could face a soft landing.
Tom Lee, one of Wall Street's biggest bulls, however, highlighted the 2 big risks that could derail the stock market next year.
These 2 risks threaten Wall Street's euphoria.
The starting economic and financial context for 2024 is positive.
Fundstrat's Tom Lee, who has one of the highest S&P 500 price targets for 2024 at 5,200 points, stressed that he expects the U.S.
economy to continue growing next year, with the PMI likely to rise also pushed of the Federal Reserve's signal to move from rate increases to rate cuts.
However, a hard landing for US power could still materialize if other countries do not recover from the current economic crisis.
This is the first risk reported by the expert.
“A global breakthrough is needed, so China and Europe have to emerge from this stagnation, and if [they] don't maybe we will have a hard landing,” Lee explained.
The dragon, in particular, is worrying due to its weak situation.
A combination of high youth unemployment, unfavorable demographics and a slumping housing market has put pressure on the world's second-largest economy.
Furthermore, Europe is heading towards recession and an ECB that is not yet officially accommodating could make the situation worse.
read also China's problems in 4 graphs.
Why the dragon is the unknown of 2024 According to Lee, essentially, if all the wheels of the global economy are not reactivated, even the USA, even if it has an advantage, will suffer.
With consequences on sentiment on Wall Street.
The second little-considered risk was thus explained by Tom Lee.
The S&P 500 traded at 4,717 on Friday, up about 5% from 5,000.
Since October 27, the S&P 500 is up 14%, the Nasdaq 100 is up 17% and the Russell 2000 is up 22%.
Meanwhile, the Dow Jones Industrial Average rose to an all-time high this week, while all other major indexes are on the verge of a new record.
Such sharp upward moves in the stock market in such a short period of time could lead to a local high that requires months of consolidation before further gains can be made, and that is exactly the strategist's concern.
read also Russell 2000 heading towards 2023 highs.
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Author: Hermes A.I.

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