by Jeffrey Kleintop, CFA® Managing Director, Chief Global Investment Strategist, Michelle Gibley, & Heather O'Leary, Charles Schwab & Co., Inc.
There are many risks for 2024 including those that are an ever-present part of investing and not unique to the outlook for any particular year. We've highlighted our top five.
- Lingering Inflation
- Rate hikes offsetting rate cuts
- China rebounding
- Artificial intelligence (AI) productivity boost
- Election surprises
Lingering inflation
Inflation has come in waves before (U.S., U.K., Canada, and Australia)

Source: Charles Schwab, Bloomberg data as of 12/15/2023.
What could cause inflation to not quickly and steadily return to central bankers' 2% targets in 2024? Potential causes include tight global labor markets, volatile energy prices, and supply chain problems. Specifically, potential supply chain problems may result from two key shipping "chokepoints," the Panama Canal and the Bab-al-Mandeb Strait in the Red Sea. Forty percent of global cargo traffic flows through the Panama Canal while 10% of global seaborne oil flows through the Bab al-Mandeb area. Due to severe drought, the Panama Canal Authority has announced it will be restricting the number of vessels by more than 50% of normal volume by February. Commercial ships have recently come under attack in the Red Sea, prompting the world's second biggest container shipping company, Maersk, and oil giant BP to halt ship traffic through the strait. Additionally, the International Longshoremen's Association serving East and Gulf Coast ports is threatening to strike in October 2024.
Rate hikes
For over a decade, the Bank of Japan's policy has enabled Japan to be an important source of investment funding; Japanese investors net outflow to the rest of the world totals over $3 trillion, including holdings of more than $1 trillion in U.S. Treasuries. Any rate hikes over the next year hold the potential to prompt Japanese investors to sell foreign assets and bring them home, a move already incentivized by a stronger currency, higher interest rates, and the 27% gain in Japan's stock market in 2023, measured by the MSCI Japan Index.
Net international investment position by country

Source: Charles Schwab, International Monetary Fund, Bloomberg data as of 12/15/2023.
China rebound
China's growth outlook revised lower

Source: Charles Schwab, Bloomberg data as of 12/15/2023.
Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data.
While China faces significant challenges (for our more in-depth take on China read: Is China Investable?), there is some potential for China to defy these low expectations in 2024. Property concerns by households may ease as government measures support delivery of contracted homes, export growth may improve as the global manufacturing recession slowly recovers, and ongoing stimulus measures may support industry. These drivers may combine to lift corporate profits and the price-to-earnings ratio of the MSCI China Index, which is currently in line with its 20-year low at nine times earnings.
Artificial intelligence (AI) productivity boost
Business leaders increasingly talk to shareholders about AI

Source: Charles Schwab, Bloomberg data as of 12/15/2023.
Search of reports from companies in MSCI World Index Including terms: artificial intelligence, AI, machine learning, chatGPT, neural networks, deep learning.
Election surprises
A risk associated with U.S. elections in particular is during the transition between outgoing and incoming U.S. presidents, when foreign adversaries often have chosen to take actions in conflict with U.S. interests, to seemingly test the incoming administration.
- After the 1980 elections, the Iran hostage crisis came to a peak and ended (1/19/81) with the release of 52 American hostages minutes after the inauguration of Ronald Reagan on the following day.
- After the 1988 elections, George H.W. Bush contended with the terrorist bombing of a commercial airliner over Lockerbie, Scotland (12/21/88) and an aerial clash that led to U.S. fighters shooting down Libyan warplanes (1/4/89).
- After the 1992 elections, the transition period before the incoming Clinton administration included 28,000 U.S. troops being sent to Somalia in December 1992. In January 1993, Iraq moved surface to air missiles into the no-fly zone patrolled by the U.S. and allied warplanes, resulting in bombing of the missile sites.
While most geopolitical events tend to have a limited impact on markets relative to the economic and earnings outlook, the risks are worth monitoring.
Be prepared
Whether or not these particular risks for 2024 come to pass, a new year almost always brings surprises of one form or another. Having a well-balanced, diversified portfolio with a risk profile consistent with your goals, and being prepared with a plan in the event of an unexpected outcome tends to be one key to successful investing.