Commentary

2024 Outlook

Five potential surprises for the economy and the markets.

Key Takeaways
  • Financial markets start 2024 with a solid fundamental backdrop, including a persistent U.S. economic expansion and monetary policymakers who are inclined toward easing.
  • We believe a lot of good news is already priced into the markets, which implies asset valuations may make it more difficult for returns to surprise on the upside in 2024.
  • The biggest changes in asset prices are typically driven by surprises. Following are some potential surprises we’re watching for in 2024:
    • Inflation may not trend back toward the Fed’s 2% target, due to a combination of factors including structurally tighter labor markets.
    • If the disinflation trend of 2023 is indeed disrupted, the Federal Reserve may have a hard time cutting interest rates to the extent investors expect.
    • If the Fed cuts rates aggressively, it might be because of the emergence of risks to economic growth that could threaten an economic soft landing and challenge corporate profit margins.
    • Productivity growth may have found a long-term bottom, and capital expenditures may provide surprising support for a number of multiyear investment opportunities.
    • Large cap, high-quality U.S. companies may once again have superior fundamentals, but they might surprise by finishing lower on the asset-return leaderboard after a phenomenal 2023.
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2024 outlook