A brand new year is here, and prospects look bright for the markets and economy. Inflation fell dramatically in 2023, the S&P 500 finished out the year on a high note, and the labor market outperformed many economists’ expectations.
But what does all of that mean for the year ahead? Here’s a closer look at what happened in 2023, and what might be in the financial forecast for 2024:
2023 Financial Review: Inflation and Economy
At the beginning of 2023, the inflation rate was sitting at about 6.45 percent. Now, that number is much closer to the Fed’s 2 percent goal, down to 3.1 percent as of November 2023. Getting back to this number has been a challenge, because the Fed had to raise rates (and risk a potential recession) to do so. Achieving that 2 percent goal might take a while longer, but inflation has definitely cooled to a more manageable level.
Thanks to that downward trend, experts believe the Fed could cut rates multiple times in 2024. But still, the Fed has to carefully watch how the economy responds to rate cuts and how that impacts the inflation rate.
2023 Financial Review: Markets
The 2023 S&P 500 rose about 23 percent, and the Nasdaq Composite increased 41 percent, both performing better than what many anticipated throughout the year. Of course there were fluctuations, but a healthy economy and jobs market, plus the potential for rate cuts in 2024, helped to keep the markets fairly strong.
That being said, not everything is going to perform well all at once. While stocks were up, bonds were having more down days across the board. That’s exactly why we diversify portfolios: to take advantage of the investments that are going up, and build resiliency for the ones that are down.
What’s ahead for 2024?
We’ve been watching recession signals carefully for a few years now, but the year ahead is actually looking pretty stable. The labor force is steady (and added more jobs than expected in December,) the Fed seems to be achieving the “soft landing” it was hoping for with inflation, and economists believe the GDP will increase in 2024. These are all positive indicators for the year ahead.
That being said, we never know for certain what the year will hold. That’s why, in good years and bad, we strive for balance and diversification in a portfolio. Use those better years to pad your emergency fund, hit your financial goals, and prepare for leaner times.
Here are some additional tips for making the most of the year ahead:
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals.