What to expect in 2024 – same as ever?

Late last year, I read a brilliant book: Morgan Housel’s Same as Ever¹. It hit all the sweet spots for me – looking at human behaviour and what we can learn, all told through wonderfully simple stories. It went straight into my top 10…

The book is built around one key insight: people haven’t changed much over the course of recorded human history. From an evolutionary perspective, you’re almost identical to the Ancient Egyptians or Mesopotamians from 4,000 years ago – and likely to be pretty similar to your great⁴⁰-grandchildren in 2,000 years. The same things still matter. Love, fear, security, power, family, fear, joy and so on. These tend to combine in the same old ways and produce the same old results.

This doesn’t mean predictions of specific events are possible, or even needed.² But it does mean we can have some idea of the type of events that might happen, and more importantly, how people and systems will react to them.

Same as ever – 2024 investor edition

OK, so assuming people and their behaviours don’t change too much, what can we usefully say about the next 12 months? Here are three things I’ll be looking out for…

1. Politics will surprise us… but won’t matter much for portfolios

One of the great quotes in Same as Ever is from Woodrow Wilson. Six years before he became the 28^th US President, he wrote a book about US politics in which he described government as “accountable to Darwin, not Newton”.

He meant that there are no fixed rules when it comes to politics – our society is constantly evolving (Darwin); the people, the structures, the systems change and adapt and interact in unpredictable ways. What shaped the outcome last time might not do so this time – making forecasting almost impossible.

And with more than half the world’s population going to the polls in 2024, that’s a LOT of Darwin-type events heading our way.³

But, over any reasonable time horizon, investing is accountable to Newton; the laws of physics and maths don’t change. Compounding up gains into more gains will always be powerful – no political party can change the basic mathematics behind that.

2. Emotions are guaranteed to make you doubt

Reading the above section in comfort, you’ll (hopefully) nod along. Most of us will calmly agree that politics shouldn’t affect investments much over the long term… And the same is true of anything else we can imagine. Wars end. Pandemics pass. Companies adapt.

Every investor knows that the best thing is to “buy low, and sell high”.

But when something scary is actually happening, we aren’t so calm. It’s all very well to agree that a nightmare isn’t real – but try remembering that when you’re dreaming! Whether it’s the week’s polling data for Labour or a bomb exploding in the Middle East, the latest Trump decree or a natural disaster a little too close to home. There’s always something that makes the immediate future uncertain.

At some point in 2024, equity markets will fall. And there will be a very compelling reason for that at the time – one that speaks to people’s emotions. And for people who manage their portfolios or run their lives based on their day-to-day emotions, it will make things verrrry difficult. They’ll forget to “buy low and sell high”. They’ll look for bad stories to believe in instead…

3. Too much emphasis on big winners

In 2024, someone will make an extraordinary amount of money investing in something you didn’t buy. Could be AI. Could be rocketships to Mars. Could be a new wonder-drug or crypto-currency. They’ll get articles written about them. You’ll think, “could have been me”!

But far more people will lose a large amount of money investing in lots of different things that you didn’t. Could be AI that goes wrong. Could be rocketships to Mars that explode. Could be a new wonder-drug that fails. Some will almost certainly lose money in yet another crypto-currency that turns out to be a scam… Of course, you won’t hear about them. They don’t get articles written about them – in fact, they don’t want to tell their stories. But if they did tell you, you’d think “I’m so glad that isn’t me”.

For every BIG winner, there are lots more people who tried and failed. They went big and they went home. There might be areas of your life where you want to do that. But investing for your future shouldn’t be one of them. It’s not a big swing and big miss situation.

There’s a connection between these points. At a quiet and rational point in time, with the help of a financial planner or adviser, you’ll have come up with a sensible investment plan, allowing for the entire noisy history that markets experienced up until the moment you invested. The plan will also account for most of the noise that you experience in the future. In the planning session, you’ll have absolutely understood that.

But it is inevitable that, during your investment horizon, something strange and nasty will happen. It will make you think the plan won’t work. Maybe as often as once a year! You’ll get surprised. You’ll start to doubt. And you’ll pay attention to stories that divert you from the plan.

The course of action is simple. Take a deep breath. Do nothing. Stick to the plan! The same as ever.

¹ If I’m being really honest, you should stop reading my words and go and read his…
² As Ahmer shows, preparing for events might be better than trying to predict them.
³ The countries having elections have a combined population of more than 4bn – though not all of them will be able to vote due to age.