The Australian stock market has started 2024 on a positive note. While the S&P/ASX 200 Index (ASX: XJO) has only increased by around 0.2% so far, the index recently hit a new all-time high, marking a 12% increase since November 2023. With the full year ahead, investors are curious about what’s in store. Below are three major questions for the ASX 200 in 2024.
Will the Australian Stock Market Hit New Highs?
The recent record high of 7,658.7 points for the ASX 200 is a welcome development, coming after more than two years without a new peak. This has sparked investor interest in how much further the market can rise. Can the ASX 200 hit 7,700 or even 8,000 points?
Following a review from GIM Trading analysts, this will largely depend on economic conditions, particularly interest rates. If rates begin to fall, as many investors expect, the market could receive a significant boost. At GIM Trading, we anticipate that as long as inflation remains under control and economic growth continues, the ASX 200 has the potential to reach new heights. However, investors should remain cautious, as unexpected economic shifts can always affect market performance.
Will Interest Rates Fall?
Interest rates have played a significant role in shaping market trends. Over the past 18 months, rising rates have weighed down the ASX 200. However, many market participants are optimistic that 2024 could bring rate cuts from the Reserve Bank of Australia (RBA).
With inflation numbers declining, there’s growing confidence that the RBA might reduce rates this year. Investors are already factoring in at least one rate cut, which has contributed to the recent market rally. However, the situation remains uncertain. If inflation starts to pick up again, the RBA may choose to keep rates steady or even raise them further. Investors should be prepared for both scenarios and consider how these factors may impact their portfolios.
What Can Investors Expect from Dividends in 2024?
Dividends are a key source of returns in the Australian stock market, often more significant than capital growth, thanks to the country’s franking system. For 2024, dividend payouts from major companies will be closely watched.
Large-cap stocks in the banking and resources sectors, such as Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), BHP Group Ltd (ASX: BHP), and Fortescue Metals Ltd (ASX: FMG), will play a crucial role in shaping dividend expectations. Other blue-chip stocks like Telstra Group Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW) will also be in focus. If these companies increase their dividends, it could lift overall market sentiment and further drive growth in the ASX 200.
Conclusion
The Australian stock market offers promise in 2024, but there are uncertainties tied to interest rates and economic trends. At GIM Trading, we recommend a balanced, long-term approach to investing. For personalized advice on navigating the market, reach out to our team today.
—Alex Green, Chief Financial Officer, GIM Trading
