What conclusions should we draw from how 2023 ended? What lies ahead?
Investors are gaining confidence in the economy.
Though worries dogged markets throughout the latter half of 2023, investors are finally believing the worst may be behind us.
There is plenty to be optimistic about. Inflation has cooled, the economy is still growing, and the labor market continues to show strength.6
A few challenges lie ahead of us.
While high inflation seems to be behind us, we're still grappling with the full impact of prolonged high interest rates.
Economists predict slowing growth and some believe a recession may still be possible.4
We'll be watching consumer spending, labor market, and other data closely for clues of what might lie ahead.
Since markets tend to reflect the economy over the medium- and long-term, we expect economic concerns to have a strong influence on market trends.
We also expect domestic politics and international geopolitical issues to inject uncertainty into markets this year.
In the short-term, investor psychology is a major driver and can even overwhelm fundamentals of profitability and business value.
Will we see a recession in 2024?
Historically, recessions have nearly always followed Federal Reserve tightening monetary policy.4 However, we might dodge one this time and stick the "soft landing" policymakers have been chasing for years.
Plenty of economists believe that the risk of a recession is low.
Others see red flags and think that a mild recession could still be on the way.
We'll just have to wait and see.
Bottom line: we're watching the data, staying flexible, and looking for opportunities in Q1.
Questions about markets or your portfolio? Please reach out. I'd be happy to chat.