2024 Q1 Market and Economic Update

There were two big issues last quarter that captured investors’ attention.  The first was interest rates.  At the beginning of the year, there was an expectation of six quarter-point interest rate cuts this year, possibly starting in March.  A combination of strong economic data and inflation starting to move back up has reset expectations.  A single data point could be ignored, but three straight months of inflation creeping higher has the Fed on edge.  This is a confusing time, as some pundits read through the data and pronounce that it is not as bad as it looks – certain components tend to have a lagging impact.  Others suggest things are even worse than they look.  What matters most here is that the Federal Reserve is concerned enough to hold off on rate cuts until it is convinced that inflation is truly under control.  This could push cuts out to later this year or even next year.  Some people are even suggesting the possibility of rate hike, based on very high asset valuations (stocks, homes, etc.) and a continued labor shortage.  It might be a bit unusual to cut rates when unemployment is near a generational low and the economy is doing fine.  Contrary to what is implied by all the talk of “high” interest rates, overall financial conditions are still loose.

Continue reading the outlook here: 2024 Q1 Market and Economic Update.pdf