This article comes from Nicholas Pardini’s insightful talk, ‘What Macro Forces Will Dominate Markets in 2024 and Beyond’, at our 2024 Silicon Valley FP&A Summit.

What macro forces will truly move the economic needle over the next few years? If you’re in finance, getting ahead of the disruption is crucial for protecting portfolios and spotting opportunities.

As a macro analyst, my job is to connect the dots between the big economic, political, and social trend lines to provide businesses and investors with actionable insights and analyses.

So today, I want to pull back the curtain and reveal the key macro trends I believe will shake up markets in 2024 and beyond in a major way. 

From new tech breakthroughs to demographic changes and shifting political winds, the macroeconomic landscape is shifting dramatically, and recognizing these pivot points early could pay massive dividends.

Ready to uncover the pivotal forces shaping the road ahead? Let's dive in!

1. Unavoidable economic volatility

The economic consensus view is that we'll achieve a fabled "soft landing" - a gradual slowing of growth that avoids recession while inflation cools back to normal levels. 

But I've got to be honest with you all - I think the odds of this "soft landing" scenario are pretty unlikely. Two other probable paths I see are either a resurgence of persistent inflation or an outright recession hitting.

One potential inflation catalyst is the enormous horde of pandemic savings flooding into interest-rate-sensitive sectors like housing, which now makes up a whopping 41% of the Consumer Price Index. 

On the recession side, the leading indicators of economic activity haven't been looking rosy outside of the job market. We're now seeing signs of consumers crowding out amid still-high inflation and rising credit card delinquencies.

Adding to the volatility risks is the political chaos surrounding the record number of elections happening globally in 2024. With India, the U.S., the U.K., and Mexico among the 4 billion people voting, how will markets digest surprises or disputed results?

From an investment standpoint, all of this potential economic and political turmoil suggests the opportunities will be greater in smaller U.S. companies and international markets rather than large-cap domestic stocks. 

The mega-caps, especially in tech, are already pricing in relatively optimistic scenarios compared to the smaller fry.

As an example, cast your mind back to the early 2000s tech bust. 

While the S&P 500 fell around 25% from the top, the Russell 2000 small-cap index rallied a staggering 165% over that stretch as the domestic economic engines kept chugging. 

International equities today are trading at a 35% discount to pricey U.S. markets, offering the same kind of potential upside.

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Finance AllianceSabrinthia Donnelly