Jack Janasiewicz discusses lessons learned from 2023 and which indicators to monitor in 2024.
- Despite aggressive rate hikes that continued into 2023, the US economy posted quarterly annualized growth rates close to 5% and equity markets pushed all-time highs.
- Key takeaway? The economy and markets are much less rate-sensitive than most people believe.
- Similarly, while the yield curve was inverted throughout 2023, a recession never materialized.
- Yes, the US economy is likely to slow in 2024, but as long as the slowdown is not dramatic, a soft landing outcome is still in the picture.
- We expect equities to post decent returns, rates to head lower and credit spreads to tighten as the economy slowly slows into the soft landing outcome and monetary policy continues to normalize.
- However, if we see a marked deterioration in the labor market, then all bets are off – although that is not our base case. Labor markets should soften, but remain supportive.
- Our one surprise for 2024 would be that inflation slows a lot faster than most people expect and we hit the Federal Reserve’s 2% target much sooner than anticipated.
- How? China continues to export deflation, Europe slows into a modest recession, supply chains fully normalize – and lower shelter costs finally begin to flow through into the core inflation data.
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