In a recent global outlook, the chairman of market and investment strategy for J.P. Morgan Asset & Wealth Management took a stab at a traditional year-end exercise: making predictions for the year ahead. But Michael Cembalest’s “surprises” for 2024 go far beyond the markets, and concern things from the White House to the weather.
At least one of Cembalest’s forecasts has really turned heads: his suggestion that President Joe Biden will suddenly drop out of the presidential race.
Cembalest, who made the predictions as part of a market outlook called “Pillow Talk,” described the list as “an exercise in thinking against the grain about what might happen in an industry dominated by consensus.”
His No. 1 prediction is that the U.S. dollar will remain stable. “Despite all the hand-wringing about the weaponization of the U.S. dollar through sanctions, the trade-weighted dollar ends 2024 up or down only 7% from where it began,” he predicts. “Furthermore, the dollar will retain its roughly 50% share of global trade invoicing.”
While it’s always dicey to second-guess what will happen among regulators and courts, Cembalest predicted the Department of Justice and the Federal Trade Commission will score a big win in one of its antitrust cases. It currently has several big names in its crosshairs, including Alphabet (home of Google), Amazon, Meta (home of Facebook) and T-Mobile, he said.
Political junkies got a heads-up when Cembalist said Biden would drop out of the presidential race “sometime between Super Tuesday and the November election.” The president’s reason will be simple: It’s his health. Cembalist thinks Biden will bow out and then turn to the Democratic National Committee for help christening a new candidate.
Cembalist’s No. 4 prediction is that people will rise up against driverless cars. He pointed out that those currently being tested on real streets in San Francisco and Austin “have blocked ambulances on their way to the hospital, hampered other emergency responders, caused accidents, increased congestion and run over pedestrians.”
Meanwhile, Cembalest said that Argentina will fail in an effort to scuttle its own peso and adopt the U.S. dollar. This “dollarization” would actually require two-thirds majority support in Argentina’s Congress, something President Javier Milei is unlikely to land. “Argentina would need substantial foreign exchange reserves and much higher savings rates to even try it,” Cembalist said.
The No. 7 prediction: Forget a ceasefire in Ukraine this year. The war will drag on, and it doesn’t matter that Russia has lost “87% of its prewar active troops … and two-thirds of its tanks.” But Cembalist thinks the U.S. will continue to step up with financial support for Ukraine. How? The Democrats and Republicans will make a deal: Democrats get support for Ukraine in exchange for something on the GOP wish list: beefed up U.S. border security at a time of surging border-crossings by migrants.
After they suffered an ignominious 2023, bank stocks will emerge resilient in 2024, according to Cembalest’s next prediction. The reason will be their robust price-to-book values. “When Silicon Valley Bank failed, U.S. regional bank valuations temporarily converged with Europe,” he said. “At that time, unprecedented rescues by the Fed and FDIC slowed deposit outflows. Despite challenges, U.S. regional bank prices compared to book ratios now will remain stable or increase.”
The next prediction augurs bad news on the energy infrastructure front—and a warning that it might be “Lights out!” for consumers. “Due to retirement of dispatchable power generation [such as nuclear, coal and gas] and underinvestment in pipelines, gas storage and winterization, major U.S. cities will face electricity outages and/or natural gas outages,” he wrote.
The Midwest faces shortages even without extreme weather, and, in more extreme weather conditions, New York, New England and the entire Western U.S. would be in trouble.
His tenth prediction is that researchers will come up with an inhaled Covid vaccine “that will sharply reduce transmission.”