Much like 2023, the beginning of 2024 has seen a growing economy and strong market performance. While indicators point to another strong year, there are some hurdles on the horizon. Here is what we saw in the U.S. and around the globe in the first quarter of the year:
2024 Q1: Economic Growth
Economies around the world have shown resilience over the past couple years; global growth was at 3.2 percent in 2023, and is expected to remain at that level through 2025. That is a bit higher than anticipated.
The U.S. economy continues to surge, and the International Monetary Fund upgraded its forecast for U.S. economic growth to 2.7 percent, which is 0.6 percentage points higher than its January prediction.
The U.S. economy is outpacing other major economies (as shown in the graph from CNN below,) but it does indicate a potentially overheated economy.
While the rate of economic growth does indicate strong spending and employment levels, it also means that the Fed might not be able to bring down interest rates quite yet. If costs come down and the economy continues to surge, we run the risk of driving up the rate of inflation again.
2024 Q1: Inflation
Inflation continues to be a thorn in the side of the U.S. economy, even though the rate of inflation has dropped significantly from its peak of 9.1 percent in June of 2022. Consumer prices rose 3.5 percent in March, which was higher than anticipated. That increase has some experts wondering if the Fed will reduce rates at all this year, as was originally planned.
The IMF believes global inflation will average about 5.9% this year, which is slightly higher than originally forecasted.
The rest of the year will be an important indicator of inflation progress. If it doesn’t come out, there could be more trouble ahead for U.S. and global economies.
2024 Q1: Markets
The markets kicked off the year on a high note. The S&P 500 has hit multiple all-time highs already this year, and risk assets like equities, high yield bonds and cryptocurrencies have continued to do well. Bonds slumped a bit, possibly due to the Fed not cutting interest rates just yet.
Global markets were also mostly up, which made for a strong quarter overall.
2024 Q1: Market and Economy Takeaways
Despite some positive markers, 2024 might still have some volatility in store. There are a few major factors at play that could impact market and economic strength: it’s an election year, inflation rates haven’t come down the way we’d like them to, and there are geopolitical uncertainties that could impact the globe.
So while the year has certainly started off well, there are still underlying pressures that could begin to weigh on the economy and the markets. The upcoming months will help show whether some of these challenges will begin to take a toll, or if this upswing is here to stay for a while longer.
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