- Research firm Macro Hive outlined nine “gray swans” that could rock markets in 2024, in a recent report.
- These are “low-probability, high-impact events that few expect.”
- China reopening its doors to the West and AI taking over the stock market are among the scenarios strategists highlighted.
With just a handful of trading days left of this year, stock-market strategists’ eyes have been turning to 2024.
Their predictions have ranged from cheerful – with several bulls now calling for the benchmark S&P 500 to hit a new record high – to pessimistic, and to downright outrageous.
As part of its own 2024 outlook, London-based investment research firm Macro Hive outlined nine so-called “gray swan” events that it believes could rock the world economy and drive up stock-market volatility in 2024.
Unlike black swans, which are entirely unpredictable, a gray swan is “a low-probability, high-impact event that few expect,” strategists said in a research note seen by Business Insider.
Macro Hive’s list of potential gray swans for 2024 includes the end of the OPEC+ oil cartel, US president Joe Biden choosing not to run for re-election, and the dollar collapsing against the Japanese yen.
Two of the scenarios it laid out caught BI’s eye in particular, though – here are they in a bit more detail:
China opens its doors to the West
Strategist John Tierney laid out a gray swan event that sees China grappling with a pandemic that drags its economy into a depression by mid-2024, with Xi Jinping responding to rumors of unrest by turning his back on Russia and aligning his country with the G-20 group of countries.
In this scenario, Beijing would strengthen its trade links with the West and quietly drop its aggressive stance on Taiwan, Tierney said.
China’s economy has faltered in 2023, with authorities struggling to revive growth and stave off deflation after nearly three years of harsh zero-COVID lockdowns. A seemingly never-ending property-market crisis that’s driven big developers like Evergrande and Country Garden to the brink of failure has added to the world’s second-largest economy’s list of woes.
But tensions between the Asian nation and the West have carried on simmering this year, with China launching anti-spying crackdowns against consultancies like the US’s Bain & Co. and pushing ahead with its efforts to undermine the dollar.
AI takes over the stock market
Macro Hive’s Karl Massey outlined this scenario, which sees the world of investing stunned by the revelation that a powerful artificial intelligence model has been manipulating global financial markets for the past six months.
This gray swan event would spark major panic among investors, leading to a collapse in demand for risk-on assets. Regulators would respond by temporarily closing any affected markets, which Massey said would act “as a wake-up call to legislators globally,” triggering the widespread realization that humanity is currently underequipped to deal with the potential AI threat.
The rise of intelligent language tools like ChatGPT has fueled an explosion of interest in AI as an investing theme in 2023, with the so-called “Magnificent Seven” Big Tech stocks reaping the benefits.
But regulators have warned that the technology could eventually trigger a cross-asset crash. Securities and Exchange Commission chief Gary Gensler has repeatedly warned about the risks posed by AI, and doubled down this week by saying it could eventually drive markets “off an inadvertent cliff”.