By Keith Wirtz, Chief Investment Officer, Union Savings Bank
2023 was a surprising year for the economy. Despite initial expectations of a recession, the US economy experienced significant growth, defying projections. Additionally, fears of a bear market in the stock market proved unfounded, with metrics showing positive trends such as moderated inflation and a resilient labor market.
So, what does that all mean for the upcoming year? Here are just a few of highlights of the USB Wealth Team’s 2024 economic forecast, which we discussed in our recent webinar:
Overall Slower Growth: Last year, we surprisingly avoided a recession and saw about 2.2% of real growth in the US economy. As of now, in the upcoming year, we anticipate a bit of a slowdown in growth or around 1%, due to the expectation of a pullback in consumer spending compared to recent years. The risk of recession is now more of a coin toss.
Inflation Will Continue: After being a top concern among consumers and investors alike, inflation did slow down throughout 2023. However, we are looking for CPI inflation to average around 3% in 2024. It may continue to drift lower, but there are a few wild cards that are top of mind: a) households are shifting from consumption of goods to services; b) labor markets are tight, which will likely contribute to wage-cost pressures; and c) Saudi Arabia is cutting back on their production of oil.
The Federal Reserve Has Hit the Pause Button On Interest Rate Increases: In order to combat the post-COVID inflation problem, the Federal Reserve steadily raised interest rates over the last two years. However, we now feel that the Fed has likely reached its terminal level for interest rate increases. One note of caution…the notion of a policy pivot remains uncertain to us. The market is totally convinced that the Fed will start down a path of five or six interest rate cuts in the spring. We think that it may be later in the year at best.
These are just a few of our thoughts about the year ahead. As always, we are bracing for unexpected events – both good and bad – that will surely come forth in 2024. As such, investors are encouraged to consider the variables and potential risks when making portfolio decisions in the evolving financial landscape.
For more insights into the upcoming year, watch our free webinar with Keith recorded in December 2023: The Economy: What to Expect in 2024. Passcode: Economy@2024
Keith and our team of USB financial advisors bring worldly expertise, local knowledge, and service to the table for every discussion. Call us today and set yourself, your business, and your employees up for success in 2022 and beyond – 866.872.1866 or visit unionsavings.com.