Quick Bites | Recession, what recession?

The recession that so many commentators predicted for 2023 never showed up. US consumers, the most important drivers of GDP, made sure of it. Last week, we found out that the US economy grew 3.1% during calendar 2023. A resilient labour market supported strong consumer spending and brushed aside the feared downturn. A year ago, economists saw a recession as probable and projected anemic 0.2% growth for the year. Instead, economic growth accelerated, and markets responded in kind.

Source: Wall Street Journal 


The US expansion is expected to continue in 2024, albeit at a slower pace. With inflation moderating, the Federal Reserve (Fed) is likely to shift toward interest rate cuts which would support the economy. But that buoyancy could be challenged by slower hiring and increased strain on Americans who have spent down pandemic-era savings.

Source: Wall Street Journal 


Most encouraging has been the sharp decline in inflation, allowing the Fed to think about pivoting to rate cuts, either in March or in May. Futures markets expect around 4 cuts (a total of 1.0% in cuts from the current official rate of 5.5%) during this year. If that pans out, the elusive soft landing, often spoken about but seldom achieved, will likely have occurred.

Source: Wall Street Journal 


With this positive economic backdrop in the US, it is unsurprising that equity markets are surging to new all-time highs.

Source: Google


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