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Reflections on 2023 

As we enter 2024, experts in the world of finance are reflecting on the unexpected events of 2023. The prevailing message is clear– financial markets remain as unpredictable as ever. Drawing parallels with the cautionary tale of 2007, experts emphasize that past performance should not be construed as a reliable indicator of future outcomes. On a positive note, interest rates are stabilizing, pandemic-related savings are contributing to economic growth, and employment figures are robust. However, caution is warranted as fear of a potential 2024 recession still linger.  

Looking forward, technological advancements, particularly in areas like AI, are anticipated to enhance productivity. But concerns remain about the reliability of key economic indicators, global geopolitical tensions and the upcoming presidential election. In anticipation of another year of financial uncertainty, remember to stay vigilant. Where there are challenges, there are always opportunities. 

Speaking of economic indicators, on our website, byfiq.com, under “Resources”, you’ll find the most important economic indicators in areas such as housing and real estate, consumer confidence, labor and employment, financial markets and monetary policy, and more–so be sure to check that out to supplement this podcast.

Wall Street's 2024 Outlook
Diverse narratives from Wall Street experts are shaking up the investment landscape. Key players, including Amundi, JPMorgan Asset Management, and Vanguard, envision a middle-of-the-road scenario marked by interest rate impacts, a mild economic slowdown, and a late-year rebound driven by central bank policy shifts. Others are more cautious, foreseeing "mild" recessions or a "soft-ish" landing. Shifting to bonds, JPMorgan Asset suggests a "tilt to fixed income," mirrored by Franklin Templeton and BNY Mellon Wealth. Bearish outliers, like Robeco and Deutsche Bank, express concerns about a potential hard US landing, contrasting with UBS Asset Management, which anticipates a soft landing boosting global equities. The unanimous sentiment is the unpredictability of the upcoming US election, with UBS outlining scenarios like a Trump-Biden deadlock, which -among other things-would impact markets. It’s looking like 2024 will be another inflection point for the country and the future of the global economy. 

Trade Disruptions in the Red Sea
In international news, Iran's decision to deploy a warship to the Red Sea is making waves and raising eyebrows. It's not just a routine naval maneuver – it's a bold move challenging US forces in a crucial trade route, adding another layer of tension with Houthi militants. While Iran might not be seeking direct confrontation, the deployment significantly amplifies its influence in the region, sparking worries. Houthi attacks, disrupting vessels with unclear ties to Israel, continue despite Western calls for restraint. Major shipping firms are steering clear of the Suez Canal, impacting global trade, and the situation is causing ripples in the oil markets. Analysts are cautioning against potential escalation, considering recent clashes and Houthi threats. Iran's strategic move underscores its regional power play, but experts believe a direct clash with the US is improbable. However, while a Strait closure remains a hypothetical scenario, its potential impact on crude prices is significant, emphasizing the delicate nature of the current geopolitical landscape.

Oil’s Surprise Drop

Speaking of crude, oil prices took a surprising hit as broader risk-off sentiment overshadowed concerns about the escalating conflict in the Red Sea. West Texas Intermediate (WTI) dipped below $71 a barrel after a retreat in equity markets, with thin trading volumes contributing to amplified price movements following the holidays. Earlier, crude experienced a rally after Iran deployed a warship to the Red Sea, adding another layer to the ongoing Middle East conflict. And though analysts view Iran's naval moves as more symbolic than impactful, crude markets remain on edge. Additionally, market focus remains on China, the world's largest oil buyer, as it increases its crude import quota, potentially influencing the country's consumption outlook. The recent production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, set to take effect this quarter, and add another layer of uncertainty, with traders expressing skepticism about the feasibility of OPEC+'s commitment to further production reductions.

Building With BRICS

The BRICS group of emerging-market nations is poised to double its membership, welcoming Saudi Arabia, Iran, the United Arab Emirates, Ethiopia, and Egypt on January 1. This expansion follows an invitation extended by current members Brazil, Russia, India, China, and South Africa to six other nations, strategically pairing significant energy producers with major consumers in the developing world. It’s worth mentioning that Argentina, however, was the only country to decline the invitation when offered. Approximately 30 countries have expressed interest in establishing ties with the BRICS, revealing its growing influence on the global stage. Nigeria, Africa's most populous nation, plans to seek BRICS membership within the next two years, further underlining their increasing significance. Despite challenges faced by individual member nations, such as U.S.-led sanctions impacting Russia and China's technology sector, BRICS remains an influential alliance shaping economic dynamics.

Swedish Bankruptcies Soar

And in Europe, Swedish bankruptcies surged by 29% in 2023, reaching the highest level since the 1990s, fueled by persistently high inflation and interest rates. Credit agency data indicates a reversal in the slightly optimistic trend seen in autumn, with December witnessing a 23% increase in bankruptcies compared to the previous year. UC credit agency’s CEO warns that the situation may be just the beginning, as more companies struggle to maintain stable turnover and liquidity, potentially leading to a new wave of bankruptcies. Despite efforts by Sweden's central bank to halt an 18-month campaign of interest-rate hikes, the country is still expected to face a recession in 2024. Prospects for easing financing conditions may emerge in the summer, with potential rate cuts from the Riksbank.

Apple Rotting?

In the stock market, investors in Apple are navigating a setback as the tech giant's shares dipped nearly 3% following a Barclays downgrade. Analyst Tim Long downgraded Apple's stock to 'underweight,' adjusting the price target from $161 to $160. The primary concern revolves around declining iPhone 15 sales, signaling potential challenges for iPhone 16 and broader hardware sales. Long points to lackluster iPhone 15 sales, notably in China, and anticipates a ripple effect across Apple products. Regulatory scrutiny is identified as another key factor impacting Apple's services business, with expectations of slowed growth. In addition, regulatory investigations, particularly around app stores and Google's payments, add uncertainty to growth prospects. Something to keep an eye on is the 2024 determination on Google's Traffic Acquisition Costs (TAC) which could intensify the app store investigations. From a business perspective, this development raises questions about the stability of Apple's business growth, as CEO Tim Cook noted in a recent investor call.

X Faces Freefall

Meanwhile, Elon Musk is under fire once again, as the value of his infamous acquisition, X (formerly Twitter Inc.), has officially plummeted to less than a third of its original $44 billion price tag. Fidelity recently disclosed an additional 11% reduction in its X holding value as of November, continuing a series of markdowns amid X's persistent struggle to regain advertiser interest. Musk's post-acquisition upheavals, marked by layoffs, office closures, and policy changes, coupled with controversies for endorsing an offensive post, have contributed to a substantial drop in ad sales revenue. Estimated at $2.5 billion for 2023, this is significantly lower than the prior rate of about $1 billion per quarter, due to major sponsors like Walt Disney Co. and Apple Inc. distancing themselves from the company. This devaluation raises concerns for Musk and his  investors about diminished returns and potential obstacles to X's future growth and partnerships, highlighting the precarious position of Musk's venture in the evolving landscape of digital platforms.

Tesla Stalls in Q4

As Elon Musk continues to attract attention, let's dive into the latest updates on his electric vehicle company, Tesla. In Q4, Tesla delivered an impressive 484,507 vehicles, surpassing analysts' expectations. However, it trailed behind China's BYD Co., which sold 526,409 electric cars during the same period. Despite exceeding its annual target of 1.8 million vehicle deliveries, Tesla fell short of Musk's ambitious goal of producing 2 million cars. This was attributed to a dip in demand, despite strategic price cuts. The evolving landscape of EV sales highlights China's increasing influence in the automotive industry, with BYD's success attributed to its diverse lineup of more affordable models. But Musk isn’t done yet. Tesla's recent foray into the competitive truck market with the Cybertruck introduces a new dimension. Musk anticipates significant production and positive cash flow for this innovative vehicle within the next 12 to 18 months. While Tesla faces challenges, especially in the wake of China's strong market presence, Musk remains optimistic about the future prospects of his company's groundbreaking ventures.

DOJ Decision Sparks New SBF Controversy

The Department of Justice (DOJ) is facing significant backlash following its announcement that FTX founder Sam Bankman-Fried will not face a second trial on charges of illegal political donations and bribery. Despite being convicted on seven federal charges, including the misappropriation of FTX customer funds, prosecutors are arguing against a second trial, emphasizing the desire for a swift resolution to the criminal proceedings. The former crypto king, scheduled for sentencing on March 28, could face a maximum sentence of 110 years. Looking at the bigger picture, the DOJ's handling of the case has ignited a broader discussion about the intersection of law and politics. Further, accusations of protecting political figures have heightened concerns about transparency and accountability within the justice system.