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2024: Finding Calm in the Chaos
A Recap of Our Kickoff Breakfast: Part 1
Good morning. Recently we hosted our annual kickoff breakfast of 2024 discussing where the U.S. stands from an economic standpoint and what it means for your investments, financial plan, and/or your business. Please do not forget, this is written solely from an economic perspective and many issues go beyond the monetary impact.
This year has all the ingredients of being chaotic. From multiple wars and problems internationally to immigration, inflation, interest rates, and an election at home where I joke that one leading candidate could be in a nursing home and the other in prison before the first ballot is cast. There were a ton of questions at our meeting across these topics and many more, so I will focus on what I believe is most important.
Let me recap the bottom line...the positives, the negatives, and what our plan going forward will be:
POSITIVES
THE U.S. ECONOMY IS STILL STRONG
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The Unemployment rate remains at 3.7%. GDP (Gross Domestic Product) growth exceeded 3.3% in the 2023 4th quarter, clearly in very good shape.
WAGES ARE STILL RISING
- Wages were up 4.2% in 2023, after rising over 5% in 2022.
CONSUMERS ARE STILL SPENDING
- Consumer spending is an estimated 70% of the U.S. economy. The unemployment rate still stands at a low 3.7%, and I believe “the shadow economy” is also adding to spending.
ARTIFICIAL INTELLIGENCE (AI) COULD BE A GAME CHANGER
- Some analysts predict AI (Artificial Intelligence) could be a bigger boost for the future of economic growth that the internet had in the late '90s.
FINANCIAL MARKETS ARE UP
- Markets have reached all-time highs, and normal election years show above average returns.
NEGATIVES
RECESSION AROUND THE WORLD
- Japan and the UK are in recession, China has slowed to a crawl, and Germany is on the brink of recession.
COMMERCIAL REAT ESTATE IN CRISIS
- Work from home became the go to option during Covid, leaving commercial properties empty. While many companies have gone back to work either full or part time, there are still problems. This could have a substantial impact on small and medium banks.
INFLATION IS STILL A PROBLEM
- While improved in 2023, inflation is still around and could become a problem.
WARS AND GEOPOLITICAL EVENTS
- Ukraine/Russia war is now in its third year, and Israel has declared war on Hamas. Neither conflict seems close to a resolution.
UNITED STATES NATIONAL DEBT
- In 2024 there is a reported $976 billion (about $3,000 per person in the US) earmarked for spending that were part of the Biden administration packages passed shortly after taking office. The total national debt exceeds $34 Trillion, increasing on average $40 billion (about $120 per person in the US) each day.
For every positive mentioned, there is a corresponding negative to be concerned about, and the same can be said for each negative. You can build a convincing case for a particularly good year, and a compelling case for a recession and steep market sell-off. Financial analysts called for and missed the recession prediction three years running (2021, 2022, 2023) and now they forecast a “soft landing” of the economy, meaning higher rates will slow the economy but not tilt it into recession. A “soft landing” has only happened once in the last 60 years.
As I have said for some time, my take is as long as the unemployment rate is below 4% it will be hard to see a recession anytime soon. That said, any negatives mentioned above could expand and send us into recession.
In Part 2 I will discuss our strategy for the year and some additional data. Until then, please feel free to pass this along to anyone you know who is anxious or is interested in our view. If you would like an appointment to discuss the questions and answers or anything outlined in this report, please call the office.
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