Why the ASX 200 is predicted to leap higher in 2024 despite higher interest rates

These experts are forecasting a strong run for the ASX 200 in 2024. But why?

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The S&P/ASX 200 Index (ASX: XJO) is charging higher again today.

In late morning trade the benchmark index is up 0.5% at 7,721.2 points.

If it can hold these gains through close, today will mark the fourth consecutive day of gains for the ASX 200.

If you're reading this before 2:30pm AEST, one important variable in today's trading that remains to be seen is what the Reserve Bank of Australia (RBA) chooses to do with interest rates.

Markets have broadly priced in that the central bank will hold rates steady at the current 4.35% to keep a lid on inflation.

If the RBA surprises with a rate cut, stocks will likely fly higher.

Should the RBA opt to hike interest rates, stocks will likely sink in afternoon trade.

However, long-term investors would do well to remember that the ASX 200 gained 9.3% in 2023 when the RBA hiked interest rates five times.

And 2 April this year saw the benchmark index hit new record highs of 7,901.2 points despite sticky inflation and ongoing high rates.

With that in mind, here's why these experts aren't losing sleep over the prospect of high rates.

Why the ASX 200 could boom amid high interest rates

As The Australian Financial Review reports, UBS equity strategist Richard Schellbach now forecasts the ASX 200 will end 2024 at 8,000 points, or 3.6% above current levels.

And these figures don't include the dividend payouts many blue-chip companies pay their shareholders.

According to Schellbach:

The positive view I had on equity markets this year has played out a bit faster than I had expected. We're in an environment where equity market valuation multiples are likely to overshoot on the upside.

As for how a potential RBA interest rate hike this year would impact markets, Schellbach said, "Often that would spook the markets." However in this, "These higher interest rates we're seeing are a product of what ultimately is a good story to equities, which is that the economy is strong … reflecting a slightly better profit growth story for equities."

Betashares chief economist David Bassanese also predicts a strong run for the ASX 200, forecasting it will reach 8,250 points by the end of 2024. That's 6.9% above current levels.

He expects one or more rate cuts from the RBA this year.

According to Bassanese (quoted by the AFR):

As soon as the RBA does finally pivot to start signalling rate cuts and the rest of the economy starts to improve, generic consumer stocks will improve and that's what's going to be driving our market higher.

The overall outlook is still one of a soft landing for the global economy and Australian economy… focusing on the big picture, it's still a bullish outlook.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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