This risk is underestimated by the markets. What to watch out for in 2024?

While Wall Street celebrates the expected interest rate cuts in 2024, a poorly calculated risk could upset stock markets and investment plans.
The alert was launched by former Treasury Secretary Lawrence Summers speaking on Bloomberg TV.
According to his assessments, there is too much enthusiasm about the Federal Reserve's accommodative path expected for 2024 and, above all, inflation forecasts could still surprise on the negative side.
US inflation has fallen faster than expected this year and futures markets are now pricing in more than 1.5 percentage points of interest rate cuts in 2024.
The central bank's preferred gauge of underlying inflation has only risen by 1.9% annualized in the six months to November, marking the first time in more than three years that it fell below the 2% target.
However, it is precisely the progress on falling prices that hides pitfalls that have so far been too underestimated.
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Faced with optimistic forecasts and the Wall Street rally at the end of the year which also gives hope for financial sentiment in the next 12 months, Summers called for prudence with the inflation factor still threatening.
“I think there's still a risk that the market is probably underestimating: that we won't make as much progress on inflation as people hope, and that there won't be as much room for Fed easing as people expect,” he warned.
of the former US Treasury Secretary.
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Federal government wage increases, threats of strikes, tension in labor markets, geopolitical risks and rising home prices are still potential sources of inflationary pressures.
“To declare that the proverbial soft landing has taken place seems premature to me,” Summers said.
“I would definitely say it looks better and more likely than it did six or eight months ago,” he added.
Finally, Summers suggested that the United States will need to increase defense spending and increase its focus on national security amid growing global conflict.
The outlook for 2024 still reveals signs of dangerous uncertainty.