Ken Fisher: the Irish stock market will rise in 2024 and here’s why

Over the last century, stock markets have rallied in the fourth year of a US presidential term. Expect this year to be no different

Hot inflation, rising interest rates, recession terror, two major wars, China’s slog and much more were widely expected to stomp stocks in 2023. They didn’t - and that isn’t surprising. Picture: Getty

For the past two months, the Irish stock market has been on quite a tear. As we move into the New Year, the big question for investors is, can Irish stocks possibly go higher?

With their heels-dug-in, doubters have downplayed every step of this young bull market, whether that’s the rally in the Iseq Index, European markets or the whole world. Many doubters still do. My advice is to ignore them. More gains lie ahead, and investors can expect double-digit stock market returns in 2024 both in Europe and the US. Why? Let me show you.

A bull market is born

Hot inflation, rising interest rates, recession terror, two major wars, China’s slog and much more were widely expected to stomp stocks in 2023. They didn’t - and that isn’t surprising.

Young bull markets are always stunningly hard to kill—harder than almost anyone thinks. If a bull market reaches one-year old (as this one did in October) then they almost always reach two. Why? Bear markets scar investors deeply and emotional recovery takes a long time.

As Sir John Templeton said in his legendary line: “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

Scepticism is now slowly transitioning toward optimism. Consider the recent talk of recession in the Eurozone and Irish economies. The “technical recession” Ireland experienced in 2023 stems from shrinking multinational profits and is not reflective of the underlying economy.

Whilst it wasn’t great, modified domestic demand in the third quarter was flat after the 0.3 per cent rise in the second quarter, while personal spending rose 0.7 per cent. Yes, some Eurozone gauges like the purchasing managers’ indexes and third quarter GDP figures show mild weakness. And maybe Europe will see a tiny recession. But more likely not, much of the world like America and Japan, enjoyed accelerated growth in the fourth quarter of 2023.

Regardless, markets still priced in the widespread talk or recession. But endless recession chatter throughout 2022 and 2023 also saps shock power.

For this coming year, many believe the fate of stock markets hinges hugely on interest rate cuts. That’s nonsense. Stocks didn’t need rate cut to soar off their lows in 2022 at a time when rates were actually rising.

Additionally, far higher rates than now didn’t forestall the Celtic Tiger years—10-year government bonds averaged 5.2 per cent from 1995 to 2006, while economic growth averaged more than 7 per cent annually. In that same period, Irish stocks soared 222 per cent cumulatively, despite the bite of a global bear market in the early 2000’s.

US elections

Politics is always hot air and right now there’s a lot of hot air coming from America.

However, the four-year presidential election cycle in the US also brings hot outcomes. Since the S&P 500 first started recording data in 1925, US stocks climbed in 83.3 per cent of presidential election years (which 2024 is going to be one) and averaged solid returns of more than 11 per cent on average. The third year of a presidential cycle (like 2023) were positive 92 per cent of the time averaging returns of almost 19 per cent. So 2023 wasn’t such an exceptional year in that context.

Stunningly, when US stocks fell in any president’s second year—like 2022—they rose in every single ensuing fourth year with the exception of 1932 when the Great Depression was at its peak.

Why do market react like this? Partly, it’s because bear markets simply scare the very bejesus out of investors (recall John Templeton’s “born on pessimism” line). It takes us a long, slow slog with endless disbelief to realise that all we had nightmarishly feared wasn’t nearly that bad in the end.

Importantly for European investors, America’s election year tailwind has a global impact as world stock markets are sneakily interconnected. The S&P 500 has a 0.67 correlation with the Iseq Index in Dublin over the past 20 years, which is quite strong given that a correlation of 1.0 signals lockstep movement and -1.0 means perfectly opposite movement. Eurozone stocks and the S&P 500 have a 0.80 correlation, which means any tailwinds helping to boost American stock markets will push European equity markets too.


But there is more to America’s four-year political cycle. US presidents always front-load their big, ambitious plans or spending programmes. The spectre of tax, regulation, property rights and spending changes elevates risk aversion among investors.

People always hate losses, or even the risk of losses, much more than enjoying or hoping for gains, politically or otherwise, which is what drives higher risk aversion among investors. As you know only too well in Ireland, the near-constant Brexit uncertainty over a new EU land border exemplifies this rise in risk aversion.

Hence, the first and second years of a US president’s term only average 60 per cent positive. The big change occurs after the midterm elections in November of year two in a presidential term, which routinely cost the president’s party congressional seats.

Enter gridlock! Big, controversial legislation dies on arrival and stocks love that quiet fizzle. Hence, the third-year boom in stock markets that you just saw after Republicans took the House of Representatives from President Biden’s Democrats in November 2022. Right now, incumbency numbers favour Republicans in the Senate and Democrats in the House of Representatives for the election in November this year, which means the current gridlock in US Congress will be extended into 2025.

Irish elections

With an Irish general election on the horizon, could this impact stock markets? Maybe Taoiseach Leo Varadkar will dissolve the Dáil in 2024 and maybe not! Headlines may howl but markets know another unwieldy coalition looms in Ireland, which means more gridlock!

The Dutch elections last November are worth noting, as the same thing happened. The European parliamentary form of gridlock is now extending globally. Voters will sigh but stock markets will smile.

Many fear that the big returns of 2023 when the Irish stock market rose 20 per cent mean a year of weakness is inevitable in 2024. History disagrees. Since consistently accurate Irish data was first published in 1988, returns from the Irish stock market have topped 20 per cent on 11 occasions.

In the 12 months that followed these bumper years, the Irish stock market declined on just three occasions and actually rose again in eight years – equivalent to a 72 per cent chance a positive outcome will be repeated in 2024. And of those eight positive years, the average return from the Iseq Index was almost 8 per cent.

Longer-running data from the US stock markets parallel this. Since 1925, the S&P 500 has risen in 24 of the 36 years following a 12-month cycle where investors enjoyed 20 per cent-plus years. The average return in those years was more than 10 per cent.

While scepticism still reigns (don’t forget Templeton), the reality should be a positive surprise for investors. Inflation should keep easing, while the money supply in the eurozone and US —inflation’s driver—is shrinking back to normalised levels after boneheaded monetary policymakers injected trillions of dollars in stimulus during the Covid-19 pandemic.

Supply chain snarls have unwound, energy prices are plunging, and ample supply should cap inflation.

The current bull market has been led by growth stocks and I expect that will continue. The Irish stock market offers little on that front so investors should shop familiar growth names from America, France, the Netherlands, Germany, and Taiwan.

But you should also expect a shift to value-based stocks later in the year. That shift will be driven by the banking system as it loosens its reigns. There is abundant time ahead for me to detail for you how that will play out into the second half of 2024, which should help propel Ireland’s core industrials and materials stocks. Until then, investors should continue overweighting on growth stocks.

Well-known worries can’t kill young bull markets. Only a huge, stealthy shock could do that, and I see none lurking. So, expect a surprisingly beneficial 2024.

Ken Fisher is the Founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, an investment adviser with over €200 billion in assets under management worldwide. He is the author of 11 books, including 4 New York Times bestsellers, and writes customised columns in leading publications across 21 countries.