The Australian stock market is already off to a flying start in 2024 so far. Sure, we're now at the tail end of January, and the S&P/ASX 200 Index (ASX: XJO) has 'only' appreciated by around 0.2%.
But when you consider that we've just seen a new record high for ASX 200 shares minted, it's not too bad. Especially so if we take into account that the ASX 200 Index has risen more than 12% since the start of November.
But even though we're one month down in 2023 so far, there are 11 to go. So let's go through three big questions that you might have about the ASX 200 in 2024
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Will the Australian stock market hit more record highs this year?
First up, let's talk about the new all-time record high that the ASX 200 hit just today. Today's high of 7,658.7 points is a welcome development for all ASX 200 investors, who have had to wait more than two years to see a fresh record following the index's last record in August 2021.
But now that this goal has finally been achieved, many investors will start wondering just how many new highs we might see this year. Can the ASX 200 hit 7,700 points? Maybe 7,900, or even 8,000 points?
Only time will tell. But if interest rates do start dropping in 2024 (as investors now clearly expect them to) without triggering an economic downturn, it could well push the ASX 200 to fresh heights.
Will interest rates start falling?
On that note, let's talk about interest rates. As we touched on this morning, the legendary investor Warren Buffett once described interest rates as 'financial gravity', pulling everything else down to earth.
There's little doubt that the pullbacks we saw from August 2021's all-time high for the Australian stock market were caused by the massive runup of interest rates over the succeeding 18 months or so.
But could the reverse happen in 2024? Well, if the RBA does decide that inflation is now firmly back under control (which, after today's numbers, seems more likely than ever), we could indeed see rates begin to drop again.
Investors have probably already baked in at least one cut this year for the Australian stock market, judging by today's euphoric highs. But if inflation continues to drop faster than expected, we could well see multiple cuts.
Of course, the opposite is also true. If inflation picks up again, we could be looking at a 2024 with no cuts, or perhaps even a hike.
What will the dividends be like from ASX 200 shares?
Let's talk about ASX shares themselves now. One of the most anticipated areas that investors focus on in the share market is what kinds of dividends are coming their way.
Given the unique structure of the Australian stock market (and our franking system), dividends form a major component of long-term returns.
Looking at an exchange-traded fund (ETF) like the SPDR S&P/ASX 200 ETF (ASX: STW), we can see that over the past 22 years or so, investors have enjoyed more returns through dividends than through capital growth.
So it goes without saying that investors will be paying attention to what kinds of dividends are coming out of the ASX 200 in 2024.
In particular, I'll be watching the big four banks like Commonwealth Bank of Australia (ASX: CBA) and National Australian Bank Ltd (ASX: NAB). As well as miners like BHP Group Ltd (ASX: BHP) and Fortescue Ltd (ASX: FMG).
Also worth keeping track of are Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW), Woodside Energy Group Ltd (ASX: WDS), Wesfarmers Ltd (ASX: WES) and Coles Group Ltd (ASX: COL).
If the majority of these blue chip ASX 200 shares give investors a dividend pay rise, it could help push up the entire Australian stock market.
