As we head into 2024, we face a new set of uncertainties that will challenge markets. Geopolitical tensions appear higher heading into the new year. The Federal Reserve is hinting at reducing interest rates, although market expectations for the number of cuts in 2024 are well ahead of the Fed’s current forecasts. The size of the Federal government deficit remains elevated and will require an outsized amount of Treasury issuance that must be absorbed by the market. Lastly, stock and bond valuations are higher heading into this year than they were going into 2023, leading to less margin of error should outcomes differ from what is currently anticipated by market participants.
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