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What's Ahead in 2024?
2024 is already shaping up to be a little...fucked. The biggest tentpole event next year is the U.S presidential election, which is looking like a fistfight in a retirement home between two people who barely know their own names. We'll also see a "year two" of artificial intelligence, with Sam Altman's OpenAI leading the charge and Google close behind. We'll also see the first true year of the weight-loss revolution that could change the world as we know it.
So with that, let's dive into what we think may happen in 2024 with our 2024 predictions.
Prediction 1: Fast Food Craters, Airlines Take Flight Thanks to GLP-1
If 2023 is remembered for one thing, it's going to be the advent of artificial intelligence. However, I'd argue that the most important short-term advancement this year was the creation and proliferation of weight loss drugs like Ozempic and Wegovy. Here's why.
America is fat. Not just fat, but like "wheeling around Dollywood with an oxygen tank waiting for fried bread" fat. The CDC estimates that 41.9% of Americans are obese. Not just overweight - obese. And severe obesity is also on the rise, increasing to 9.2% of the population in 2020. So, like the sheriff cleaning up the saloon, Semaglutide and GLP-1 are here to kick in those weird little swinging doors.
Early progress on GLP-1 drugs like Ozempic and Wegovy are not just positive - they're stunning. In a 175 patient study of overweight or obese participants, these drugs showed a total body weight loss of 5.9% through three months, and 10.9% at six months of use. But that's not all. These drugs also showed a corelation to curbing alcohol use, as well as something as banal as biting your nails. This doesn't just seem to be a fat loss drug; it seems to be a drug that eliminates cravings, leading to possible use cases for addiction.
So what's the prediction here? It's that as these drugs become more widespread, sin stocks like fast food, alcohol and tobacco will decline as a direct effect. Additionally, the next wave of effects will be on the industries that have to cater to the obese, like airlines, whose biggest non-labor expense item is fuel costs. The reduction in passenger weight could lead to direct reductions in fuel expenditures, increasing the margins for airlines around the world.
Finally, healthcare. I think we could see a decline in companies that treat obesity-related conditions, while we see a rise in insurance companies that continue to collect premiums, but could reduce their payouts due to obesity-related situations. For ease of reference next year, let's say:
Stock Down: fast food, alcohol and tobacco companies, hospital groups
Stock Up: airlines, insurance companies
Prediction 2: AI Stays Hot, Nvidia Does Not
Artificial intelligence has been the name of the game for every CEO looking to stay in their job this year. With ChatGPT setting records for user growth, artificial intelligence is in the hands of anyone that wants it. For some, this is great. For others looking to keep their jobs in the white collar world long term, this is not so great.
The explosion in artificial intelligence has also led to a boom in the "picks and shovels" companies. The old adage goes: who got the wealthiest during the gold rush? The ones who sold the picks and shovels. The theory is that, instead of investing in the commodity itself, you invest in the infrastructure around it. With AI, that means chips; and a lot of them.
The biggest winner of 2023 was Nvidia. Nvidia's stock didn't just skyrocket. It's currently high-fiving the dummy in the Tesla rotating around the Earth. Up 234% year-to-date at time of writing, Nvidia has led the way in the microchip and processor space, allowing AI to function as needed. However, there's an issue.
As Isacc Newton proclaimed after he finished swearing at the apple: "What goes up, must come down." Well, Nvidia's remarkable rise this year is only partially warranted. At a Price to Earnings ratio of 63.25, Nvidia is 3x more richly valued than the peer average, as well as the S&P 500. To fully realize the value of their current share price, Nvidia either needs to:
Find another market like AI and pull this same trick again, or
Identify and eliminate the competition like John Wick post-puppy
Both of these are unlikely, so I think that the picks and shovels play for AI is largely over for the time being. I'm adjusting my expectations for these companies moving forward, and I'm much more interested in the actual AI plays like Microsoft and Google that are integrating AI into their tools from the ground up and not just changing their names to "Microsoft.ai."
I think next year will see the continued rise of the concept of AI, but the coming-to-earth for companies like Nvidia that are positioned on the periphery.
Prediction 3: Apple Is The Top Performing Stock In The S&P 500
Some of you will have read that headline and said "yeah no shit. Good company keeps being good." Some others of you will have read that, sworn at me a little for not knowing what I'm talking about, and then switched to Instagram to stare at the 16 pornstars you follow. Hear me out before you break out the lotion and happy tissues.
Apple is a spectacular company. You could argue it's the most well-run, successful company of all time. Thanks to constant and consistent innovation, it continues to capture the hearts, minds, wallets and attention spans of pretty much every consumer on earth. Up until now, that was a good thing. However, Houston, we have a problem.
How many new iPhones can someone buy? How many Apple Watch Series 12 SE XXX editions can you fit on your wrist? Sure, these things have a shelf-life, but they also are fairly durable products by today's standards. Critically, their products are also "the standard."
How does it feel to text someone and get a green bubble? Does a chill come over you and a sudden urge to call the police starts to rise up inside? What about seeing someone with a * gasp * Microsoft Surface tablet? Yeah, didn't think so. Apple products have found their way into essentially being a monopoly, and this provides them one hell of a platform for their other businesses.
While their hardware sales may be slowing, their services business is continuing to pick up steam. In 2023, the services division accounted for 25% of total revenue, surpassing iPads and wearables (watches, AirPods, etc). To me, this is a natural entry point for artificial intelligence.
"Apple AI" on release day would become the standard. It would put AI into each tool you use, each class you take and each show you put on the iPad to keep your two-year-old docile at the restaurant. It would be the most seamlessly integrated AI on the market immediately, and the results would be astounding. Couple this with Apple's entry into AR with their stupid headset thing, and you're looking at a market in a few years that could be immense, but accretive to the bottom line almost straight away.
You also have the fact that Apple isn't currently embroiled in headline legal scandals like their competitors. Microsoft is dealing with the OpenAI drama from November that saw Sam Altman removed and then reinstated like your mom's new boyfriend that drives that one motorcycle you hate. Meta is being sued by every governor that has aspirations of making a name for themselves, and Netflix is too busy not paying their Squid Games contestants to keep an eye on the ball.
I think that Apple is the clear winner next year of the S&P 500, and leads the "Magnificent 7" even higher than their unprecedented 2023 figures.
Prediction 4: The Housing Market Becomes Even Less Attainable
I mentioned it in last week's review of our 2023 predictions, but the housing market is in a precarious position right now. Take my personal example: as a current homeowner with a great job and a high household income ($250k+), my wife and I can't do dick. There is no inventory in the region in which we want to move, and when there is inventory, it's overpriced. Not to mention that to move, we'd have to trade in our 3.25% mortgage for a 7.5% one, which coupled with the inflated home prices, would more than triple our monthly payments.
Herein lies the issue. Next year, experts are predicting several interest rate cuts that will effectively serve to lower borrowing rates for homebuyers. While this sounds like a good thing, I don't think it will be. You think homeprices are high now? Try in 12 months when the Fed cuts 1% off the top.
I think next year will introduce the mother of all bidding wars for homes. The explosion of prospective buyers, coupled with the inflation we've seen in all sectors for the last two years, will be the pile of dynamite that's ignited by the match of rate cuts. The American Dream continues to get further away for younger generations like mine, and we're all going to feel it.
Prediction 5: President Nikki Haley
Are you ready to go way out on a limb? Let's get political and chat through the upcoming 2024 presidential "race" between two incumbents: Joe Biden and Donald Trump. One year out as we sit today, Trump not only has a 20-30 point lead in the Republican primary - he has a 10-15 point lead on Biden. Now, anything can happen in a year, and I expect the next 11 months leading up to election day to be hot hot hot.
Trump's Tumultuous 2024
First, let's chat Trump. His base will never leave, so they're wrapped up. Now his focus turns to the "messy middle" generally consisting of minorities and suburban moms, the secret power center of any American election. In this, there will be one key factor that will determine Trump's viability as a second-termer: if he's in prison.
Trump currently has 91 outstanding felonies against him at both the federal and state level. According to research done by Prof G Media, each of these counts has a conviction rate of between 71-90%, depending on the count and jurisdiction in which it falls. According to that same outlet, the chance that Trump is found innocent in all 91 counts is 1 in 700.
Now, if Trump wins, he could theoretically pardon himself of all federal crimes (though Constitutional scholars are split on whether he can actually do this or not). The key case here is the Fulton County election tampering case, which is a state trial. He could be pardoned from this as well, but Georgia is a state in which the governor does not have absolute pardoning power, so he would have to rely on a panel to oversee the pardon.
To me, this spells a plea deal. Trump, and I can't believe I'm writing this, is a smart guy. He doesn't want to spend his remaining few years behind bars, which says to me that he'll take some sort of deal to admit guilt, stay out of jail, and get barred from running for public office again. In this scenario, Trump falls out of the race, likely after the convention, which will leave the party in turmoil and looking to name a successor.
Nikki Haley's Rapid Rise
When Nikki Haley formally announced her run for office in Februrary 2023, the common wisdom was that she was running for a spot in the Cabinet, or maybe VP. At the time, Florida Governor Ron DeSantis was the shining star of the Republican party, having sewn up his re-election by 19 points in what was formerly a purple state. He was viewed as the future of the party, and essentially marketed himself as "Trump without the baggage."
However, 2023 has seen quite the opposite. DeSantis's campaign got off to a brutal start as he attempted to launch his bid in a Twitter Spaces with Elon Musk that had more tech issues than James Brown on an adult site. Then there was the high heels issue and now DeSantis is closer to "Jeb Bush with baggage" than most would care to admit. This opened up a white space in the party, which was temporarily filled by Vivek Ramaswamy and now seems to be more permanently filled by Haley.
Haley, in her rise up the ranks, has been the only Republican nominee to take advantage of the debate stage. She's aligned herself to the more moderate side of the party, towing the line between conservative values and democratic populism. This move to the center brought gifts, including increased polling popularity that's moved her to second in Iowa, as well as the deep pockets and endorsement of the Koch family, adding to the endorsement from popular party figure Governor Chris Sununu. Haley's building a warchest of funds, organizers and endorsements that may be locking down second place on the Republican ballot.
The Biden Problem
When he ran against Trump in 2020, Biden's sales pitch was that he was a return to normalcy. He was meant to re-instill dignity in the Oval Office, as well as a quiet confidence that America is back and ready to lead. What's occurred is a little bit different.
Biden has actually been quite a successful president from a pure "getting things done" standpoint. He passed the Inflation Reduction Act, one of the biggest pieces of infrastructure legislation in American history. He's backed Jerome Powell throughout his administration, and has been rewarded with inflation being the third lowest of the G7 while seeing growth higher than all of the G7 through 2023. Unemployment is low and wages are rising, and he's currently winning a proxy war against Vladamir Putin with no American troops on the ground in Ukraine. However, he has three main problems:
The first is his age. Biden will turn 82 shortly after election day in 2024. To many, that's a problem, and a big one. And while he hasn't shown many public signs of cognitive decline, the media is beginning to wave some red flags about how fit for office he actually is. This is also keeping in mind that either Biden or Trump would be the oldest ever president sworn in, regardless of who wins next November.
The second problem Biden faces is border security. Under his watch, the southern U.S border has seen record influxes of illegal immigration. Biden also reinstituted the frankly barbaric treatment that was implemented under the Trump administration of separating families and stranding kids at the border.
Finally, he has a Hunter problem. Hunter, Biden's oldest living child, has been indicted for illegally owning a gun while using drugs, as well as nine tax-related charges. There was also a 2020 report by the New York Post regarding a laptop of Hunter's that contained nearly 130,000 emails pertaining to his business dealings, some of which reportedly link President Biden to underhanded practices that may have allegedly directly benefitted the family. This has spawned an impeachement investigation by the House of Representatives against the president, further sinking his approval ratings to historic lows.
To summarize, Biden and Trump are two of the most deeply disliked and flawed candidates in U.S history. It seems like the only opposition they could beat is each other, which is where Haley can step in and take the reigns.
FiveThirtyEight doesn't even currently have Haley ranked as a possibility to take the office, but I think she could shock the world next November.
