Capital markets in 2024: in 77 trading days up to more than 9 % return

Almost a century of statistics (from 1928 to 2023) of the US capital market, which accounts for 60 % of the global stock market, shows that an election year in the US, that is the fourth year of a presidential term, is handsomely profitable. Especially when a Democrat sits in the presidential palace. Will it be the same in 2024?

77 is a winning number that we Slovenians love very much when we move around the basketball floor. As of April 23, 2024, 77 trading days are behind us on the stock market floor, which brought good returns to investors in the capital markets. The American stock index S&P achieved a total return of 9.61% from the beginning of January to April 22, measured in euros. It would have been even higher if the technology stocks of The Magnificent Seven (The Magnificent Seven) had not fallen by more than 8 % in the second week of April, which also affected the correction of the S&P 500 index by 5.6 %. These are technology companies Tesla, Nvidia, Apple, Amazon, Meta Platforms, Microsoft and Alphabet.

Based on the statistics of the presidential cycle, can we expect positive returns this year as well?

We will discuss this with Aleš Lokar, this year's winner of the award for the best asset manager in Slovenia, at the financial webinar Winning strategy for capital markets in 2024.

The American presidential cycle ends with the fourth year, which is also the election year for the next term. The average return of the last fourth year of a presidential term, calculated from data from 1928 to 2023, is 5.5 %. Moreover, the average return in the last 100 years when the president is a Democrat is even higher. The fact is that Democrats are more inclined to spend, and the economy and the capital market respond to this by expecting higher revenues and higher profits, which positively affects the level of the market value of stocks.

But other factors also have an influence on the capital markets.

• The inflation rate is not decreasing as expected and, in connection with this, the expected reductions in interest rates are being pushed into the future.
• Geopolitical tensions have a short-term impact on the markets, but over a longer period their influence is diluted.
• Artificial intelligence, rising purchasing power of developing markets like India, biomedicine and other economic trends are influencing investor expectations and the future direction of markets.

6 months of strong growth in the global capital markets are behind us. From January to mid-April, equity investors were rewarded with returns of more than 9 percent. In mid-April, stocks of the tech giants faltered and attention shifted once again to commodities, energy, industrials and financials stocks.

Capital markets are characterized by short-term volatility: The market price of shares is influenced by the expectations of investors in the future, which depend on various geopolitical, macro and micro developments. All investment classes are exposed to volatility, so two principles are important for investors: diversification or dispersion of investments and the principle of long-termism. Many people will be surprised to read that despite short-term fluctuations, the historical long-term average annual return on capital markets is 6.5% after inflation.

The returns on global stock markets show again and again that being too conservative and sticking to bank deposits is not the most optimal choice for an individual's financial assets. But despite this, Slovenians have 26.38 billion euros of their savings in bank accounts and only 5.3 billion euros in mutual funds.

Which is the winning strategy for personal finance management in capital markets in 2024?

Sign up for a financial webinar and listen to the conversation with Aleš Lokar on Wednesday, May 8, 2024, at 2 p.m.

Aleš Lokar is the head of the management team for the sub-funds Generali of the Umbrella Fund: Generali Galileo, Generali Globalni and Generali Rastko, with a total value of 225 million euros in assets. In April 2024, he was recognized as the best asset manager in Slovenia at the 14th award ceremony for the Best Asset Manager in Slovenia, conducted by Revija and the Moje Finance portal, the leading media for personal finance management. Aleš Lokar already received the award for asset manager in 2017.

The S&P 500 Index (Standard & Poor's 500 Index) is a market capitalization-weighted stock market index of 500 leading public companies in the USA. It includes representatives of various sectors and is designed to illustrate the performance of the entire US stock market. Many investors consider this to be the best indicator of the US stock market.

If you're not sure what to do, talking to a financial advisor can help you figure out the best approach.

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