Markets, elections and AI in 2024

This is an audio transcript of the FT News Briefing podcast episode: ‘Markets, elections and AI in 2024’

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Marc Filippino
Good morning from the Financial Times. Today is Tuesday, January 2nd. And this is your FT News Briefing.

We are kicking off the new year with a look at what’s gonna happen in 2024. There are a lot of elections happening around the world. Interest rate cuts are coming, probably. And artificial intelligence will still be a red hot topic. But how are all of those things gonna shake out? Well, stick around. We’ll talk about them. I’m Marc Filippino. And here’s the news you need to start your day.

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Markets did a lot of weird things in 2023. The S&P 500 went on an absolute tear in a good way, even though interest rates were at a 22-year high. Bonds were well, yields hit 5 per cent at one point, but subsequently rallied. And investors are geared up for central banks to lower interest rates. I’m joined now by the FT’s markets editor, Katie Martin, to talk about rate cuts and all the other weird stuff that might happen in 2024. Hey, Katie.

Katie Martin
Hey, how are you doing?

Marc Filippino
I’m doing all right. Before we get into 2024, let’s start with 2023. The big thing going into 2023 was that we were gonna get a recession because interest rates were so high.

Katie Martin
It all went wrong (laughter).

Marc Filippino
Yeah, I know. But in the best kind of way, I guess? I don’t know.

Katie Martin
It went wrong in a good way. So the market, you know, a kind of catch-all term for investors and economists and analysts was absolutely as certain as it could possibly be that 2023 was going to be a recession year for the US. And that was going to bring hellfire and brimstone to the stock market. This has not worked out at all, like at all, at all, at all. So what that meant was that fund managers got some key calls completely wrong. So, for example, stocks did not fall. We got the S&P 500 up sort of well over 20 per cent for the year. You know, this is a really serious rally. And so it felt for a lot of investors, like 2023 has been a year where you’re just constantly trying to nail jelly to the wall and it, you just cannot get the stuff to stick. Nothing, nothing has worked out. And so the word that lots of fund managers are using with me is humble. Got to be humble. We actually didn’t understand recessions or markets very well at all.

Marc Filippino
I love that analogy, trying to nail jelly against the wall, and I think it’s incredibly applicable here. I wanna talk about whether or not we have dodged the recession or whether or not 2024 is the time when we’ll see it, because we have seen some wobbles, right? So will the economy break in 2024?

Katie Martin
That really is the big question. We’ve got a situation now where the market is pricing in something like six quarter-point rate cuts from Federal Reserve in 2024. That’s a lot.

Marc Filippino
Six is a lot. Yeah.

Katie Martin
Six is a lot. At the same time, you’ve got stock markets at or near record highs in the States, which tells you everything’s great. So you’ve got the stock market saying everything’s great, just buy everything. Equities are fantastic. No recession over here. But there’s just this weird sort of stand-off now in the markets. And the Federal Reserve and other central banks, for that matter, are going to have a really difficult time in 2024 managing that communication process where there’s a very trigger happy market that’s looking for lots and lots of rate cuts. And if that proves not to be wrong, if for example, inflation is not dead, you’re only going to need to see one or two economic data releases saying inflation is picking back up. And my expectation in that scenario would be that you’d see some pretty violent moves in the markets to go back to the bad old days of high inflation, low growth.

Marc Filippino
That is a real bummer, Katie, because I, I think like a lot of people, were hoping next year would be kind of dull, just tread some water. That sounds good to me.

Katie Martin
Just look, you know, wouldn’t it be nice if we all just try to smooth out for a while. (laughter)

Marc Filippino
I could really use a boring year, you know.

Katie Martin
There’s too much excitement. I could use a boring year, but we’re not gonna get one, I don’t think, because you have got this tension between policymakers and markets and we have got loads of elections, not just the US. What is it like 40 per cent of people on the planet are gonna be in a country that has an election in 2024. So there’s elections all over the place. And because the markets are much more focused on fiscal policy, so what governments do with like taxing and spending, that means there’s a possibility for all sorts of kind of domestic bits of market volatility as investors kind of take stock of that. So I fear it is not going to be boring. I’m very sorry, Marc.

Marc Filippino
Damn shame, Katie. Oh well, anyway, Katie Martin is the FT’s markets editor. Thanks so much, Katie.

Katie Martin
Pleasure.

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Marc Filippino
And speaking of those elections, well, as Katie said, there are a lot. Here to help me unpack a few of them is the FT’s US managing editor, Peter Spiegel. Hey, Peter.

Peter Spiegel
Thanks for having me on, Marc.

Marc Filippino
All right. So which elections are top priority for you in 2024?

Peter Spiegel
Well, I mean, look, I’m US managing editor, so of course, I would say that the US presidential election. But I think everyone would answer the same way, no matter where you’re sitting on in the world, just because, A, it is the hyperpower, right? As the French would say, and along with China, the world’s largest economy. And so what happens in the US is always of consequence, but particularly now given, let’s be honest, the stark contrast I mean, what we were anticipating is a rematch between Biden and Trump, two very different visions of what the US role is in the world, what US economic policy should be. Really, really consequential event and has knock-on effects globally, even beyond what the US can do, right? So I would say that the US election is the most important thing we’ll be watching in 2024.

Marc Filippino
OK, so we got the US. What other elections are you looking out for?

Peter Spiegel
Obviously, we’re watching the UK as well. And I feel like it is a bias of ours at the FT. But I think it’s important, as Britain is a proper G7 country that has important influence in Europe and in some ways still globally. A lot of the dynamics that are happening in Britain are happening throughout the west. And it’ll be interesting to see whether Rishi Sunak, the sitting prime minister and his party, the Conservatives who have been in power for basically over a decade now, will break up and we’ll see the return of a moderate Labour prime minister, the first moderate Labour prime minister, frankly, since probably Tony Blair, you could argue. You know, Keir Starmer, who is the Labour leader in many ways, brought his party back to the centre. And if Starmer wins, you have a return to moderation in British politics. I think it’s a good one to watch because it does have a signalling power in that regard.

Marc Filippino
Yeah. So Peter, we’ve talked a lot about the west, the US, the UK, but what about Asia? India is holding elections in the spring of 2024 and the current prime minister, Narendra Modi, is looking for a third term. What are your thoughts there?

Peter Spiegel
Well, look, I mean, India, I think, is a foregone conclusion, but it is worth watching because of Modi’s role geopolitically, right? The US has decided it’s all eggs in the Indian basket. They are backing Modi as a counter to China. And that comes despite recent accusations that the Indian intelligence service has been actively targeting for assassination American citizens in the US of Sikh extraction and successfully in Vancouver, Canada. And that is incredibly unsettling for the west and its relationship with India. But also, as Modi becomes more comfortable at home with his majority, there is a chance he becomes more bold in that area. So we’ve got to keep an eye on that.

The other thing I’ll just mention, and it’s not a huge election, but it happens in 2024 is Taiwan. And we just mention this because Taiwan is a flashpoint. And when elections happen, there is election-style rhetoric and any discussion in Taiwan of independence is bound to spark a reaction in Beijing and probably then a knock-on reaction from Washington. And relations right now between Washington and Beijing are just very bad. And I think we just got to watch that, right? Xi Jinping, the president of China, has said very publicly, it is a goal of his by the end of his time in office to reunify Taiwan and China. That is a red line for the US, particularly if he decides to use force to do that. And it is in many ways the most dangerous place in the world.

Marc Filippino
Peter Spiegel is the FT’s US managing editor. Thanks, Peter.

Peter Spiegel
Thanks for having me on, Marc.

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Marc Filippino
Artificial intelligence really took off in 2023. The generative AI tool ChatGPT quickly became a household name. And AI started popping up in everything from search engines to music streaming services. Is 2024 the year we start paying for generative AI? And how will regulators step on any plans for real moneymaking endeavours? Here to answer those questions is the FT’s Elaine Moore. Hey, Elaine.

Elaine Moore
Hi.

Marc Filippino
All right. So could 2024 be a pivotal year for the business model of generative AI?

Elaine Moore
I think it could. 2022 and 2023 were pivotal years as well for generative AI, and I think that that trend is going to continue next year. I think what’s going to be different in 2024 is this question about companies starting to pay for AI tools and services because the organisations that have built these generative AI tools now want to start making some money. And I think it’s gonna be really interesting to see how many companies want to pay for this. We’ll start to see you and I perhaps will be asked whether we’re using these tools in our day-to-day lives to increase productivity. Right now, the answer’s not quite clear about how useful they’re going to be and how many of us will want to pay for them.

Marc Filippino
OK. So there is a lot of optimism or a good amount of optimism on the corporate side for AI, but there have been just as many, if not more, conversations about the doom and gloom surrounding artificial intelligence in 2023. Do you think regulatory efforts on AI are going to pick up in 2024?

Elaine Moore
I think that we will. Countries are very keen on proactive regulation in this space and that is partly the result of organisations like OpenAI, which has led the generative AI mania, telling everybody how dangerous this could all be. The start-ups are complaining and saying that that sort of gives power to the incumbents and makes life harder if you’re trying to get into this space. I think also some of the tension is this regulation the EU is leading, the US is following fairly fast behind. It’s not entirely clear what the goal is of this regulation. There’s lots of questions about copyright and making sure that work is not stolen or used inappropriately, but things like watermarks that would be very useful and would be very effective so that you can see what has been made by generative AI and what has been made by a person that still hasn’t come to a conclusion yet. So I think things like that are going to become a bigger question in 2024.

Marc Filippino
So we should mention the huge impact that AI has had on the stock market in 2023. Just a handful of companies have driven up all the gains in global stocks, and most of those companies deal heavily with AI. Is that going to change in 2024, given this new focus on revenue generation?

Elaine Moore
Everything in 2023 in terms of stock gains has largely been around generative AI. 2024, who knows? Maybe we start to see some more realism when investors start to look at exactly how much money is coming in. But if you think that the reports are that OpenAI has a revenue run-rate, annual revenue this year is expected to be more than $1bn, then there is money coming in already for OpenAI tools and services. In Silicon Valley, there’s this techno-optimist versus techno-doomer’s scenario being played out, and that’s all around AI. I think 2024 is actually going to be a win for the techno-optimists.

Marc Filippino
Elaine Moore is a tech columnist for the FT based in San Francisco. Thanks so much for your predictions, Elaine.

Elaine Moore
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

The News Briefing is produced by Kasia Broussalian, Sonja Hutson, Fiona Symon and me, Marc Filippino. Our engineer is Monica Lopez. We get help from Sam Giovinco, David da Silva, Michael Lello, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

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