As the New Year approaches, it’s time to share my forecast for 2024.

From now through the end of 2023, I will share two predictions for the upcoming year in each issue of Street Authority Insider.

Over the years, we here at Street Authority have covered all kinds of innovations, from DNA sequencing to algae fuel. At the time, some of the breakthroughs we pinpointed may have seemed far-fetched — if not the stuff of science fiction.

However, technology has a way of bringing tomorrow’s miracles ever closer. And before you know it, those miracles are yesterday’s news.

It really wasn’t that long ago that computer storage capacity was measured in kilobytes. And then megabytes. And then gigabytes.

And now you can carry around a terabyte of information in the palm of your hand. Semiconductor makers can stack 50 billion transistors on a tiny piece of silicon the size of a fingernail.

We live in a world where our wedding pictures are stored in the cloud. Where we communicate virtually with work colleagues. Where smart refrigerators can send us notifications when the milk carton is empty.

And — in some markets — where a fresh gallon can be delivered by autonomous drone.

With all of this in mind, even some of today’s more fanciful predictions are well within reach, given the steady march of science and industry.

That said, not all of these ideas will come to fruition. And not all of the securities mentioned will pan out.

It comes with the territory. When you swing for home runs, you can expect a few strikeouts along the way.

But it doesn’t take many game-changers to jump-start your portfolio and put you on the path to financial independence.

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The U.S. Will Go to War in the Middle East

It’s the last thing anyone wants. But conflict has been simmering once again in the Middle East, and it could very well boil over into a full-fledged war.

On October 7, 2023, Hamas militants infiltrated Israel in a coordinated land, air, and sea assault, wiping out entire neighborhoods and leaving behind a wake of death and destruction. Armed with thermobaric grenades, five other armed Palestinian groups, including the Palestinian Islamic Jihad, joined in the raids.

More than 1,200 people were brutally murdered in the worst terrorist attack ever on Israeli soil. Many others (including some Americans) were abducted and held as hostages.

Israel immediately declared war and launched retaliatory artillery counterstrikes. Tanks and troops have since mobilized and crossed the border into Gaza, rooting out Hamas leadership.

Thousands of missiles have rained down on both sides, flattening structures. And thousands of people have been killed.

While regional leaders have advocated restraint, attempts at peace and reconciliation between these bitter enemies have made little headway. And it’s certainly plausible that this conflict could escalate.

Syria could intervene at some point, and many believe that Iran’s Hezbollah helped plot the attacks. That’s why the Pentagon has already put 2,000 U.S. troops on standby for possible deployment.

I think the more likely scenario is for the White House to tighten sanctions against Tehran, which could threaten shipping in the Straight of Hormuz.

Intelligence agencies have already raised the alarm, and for good reason. This narrow shipping lane between Oman and Iran is a vital energy corridor; about 20 million barrels of oil — one-fifth of the world’s consumption — pass through it daily.

Any kind of supply disruption could send already elevated crude prices soaring toward record levels near $150 per barrel. Remember, the U.S. Strategic Petroleum Reserve has already been mostly drained.

And geopolitics aside, the world has never been thirstier for oil, with demand rebounding to 102 million barrels per day.

Needless to say, this scenario would be a boon for the world’s major oil producers. But smaller players with stronger growth profiles (and more leverage to crude prices) will have the most to gain.

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The Fed Will Reverse Course and Begin Cutting Rates

While I’m going out on a limb with some of these predictions, this one just might be a lock.

Don’t take just my word for it. A recent survey by Bankrate found that 94% of economists expect the Fed to lower interest rates next year.

And the market is already responding. Yields on the influential 10-year Treasury note have plummeted. Mortgage rates have tumbled 70 basis points since October — the sharpest drop since 2008.

It took extreme measures, but the inflation tide has finally turned. The latest Consumer Price Index (CPI), wholesale Producer Price Index (PPI), and other such barometers all show that inflation has been largely tamed and is easing back toward the Fed’s 2% comfort zone.

The central bank’s aggressive tactics did the trick. So after a dozen interest rate hikes, tightening should soon give way to loosening.

With current short-term borrowing rates at 5.25% to 5.50%, we are likely at the peak.

Charles Schwab’s chief fixed-income strategist sees the beginning of rate cuts happening by next quarter. The biggest question is just how much cutting we’ll see.

The market is currently anticipating three quarter-point declines (75 basis points total) in 2024. But to revive the sluggish economy, it might take more monetary medicine. UBS Investment Bank is forecasting 275 basis points, nearly three full percentage points.

I think we’ll land somewhere in the middle. But politics may enter into the equation as well. Rate cuts stimulate both the market and the economy — and 2024 is an election year.

The prospect of cheaper borrowing costs is bullish for most of the market, particularly rate-sensitive groups such as utilities and real estate, as well as debt-fueled technology companies. But the bond market is much more sensitive and responsive to rate vibrations.

The best play just might be an unorthodox stock/bond hybrid.

Despite its low correlation with traditional asset classes and ability to dampen volatility, these securities are conspicuously missing from many portfolios. They offer some of the richest yields in the investment-grade universe, with distributions that often qualify for favorable tax treatment.

I’m talking about preferred stocks.

Like common stocks, these securities represent ownership in a business. But they behave like bonds, with a fixed coupon payment tied to a stated par value. Investors can expect to pocket steady quarterly income payments — often two to three times what the issuer pays its common stockholders.

Preferreds seldom stray more than a few dollars from par value. However, as fixed-income instruments, they are susceptible to rate fluctuations and lose ground in rising rate environments. Due to historic rate tightening, many quality preferreds have been heavily discounted.

It’s not unusual to find $25 par value preferreds now trading in the $20 range. As conditions return to normal, that could mean 25% capital gains — plus dividends, of course.

P.S. Over at High-Yield Investing, I research and present some of the best income opportunities the market has to offer. Go here to access my latest report now.