What's in store for 2024

What's in store for 2024


Derek Hamilton

  • Managing Director, Economist – Ivy Equity Boutique
  • Read bio

As we look back on 2023, a few things stand out to us:

  • The US economy held up much better than we expected. Government spending was quite strong in 2023, accounting for more than a quarter of economic growth through September. In addition, over the past six months, government hiring accounted for roughly 30% of total job growth. This, coupled with healthy consumer spending, (due in part to a continued reduction in excess savings) seems to have kept the economy afloat despite the US Federal Reserve’s (Fed’s) aggressive pace of interest rate hikes.
  • US inflation continued to move lower throughout 2023. Core inflation, which excludes volatile food and energy prices, saw a significant move lower throughout the course of the year. The annualized 3-month percent change for the core US Consumer Price Index (CPI) ended 2023 at 3.3%, down from 4.3% at the end of 2022.
  • The Fed continued to raise interest rates, pushing them up by another full percentage point over the course of the year. Over that same period, the 10-year Treasury yield rose by roughly a percentage point to around 5% in October. However, the Fed’s subsequent pause caused a full reversal, with the 10-year yield falling back to just under 4% at the end of 2023.

Where does this leave us in 2024?

Our view remains the same. The data we examine continue to point to an environment with a high risk of economic deterioration. An example of this can be found in the chart below, which shows the percentage of US states seeing an increase in economic activity. Less than half of the states now show economic growth, which historically has been a signal that a recession is near. If this forecast comes to fruition, we believe that risk assets could struggle. We still think that inflation will fall further and that the Fed will cut rates. We plan to cover these topics in further detail soon.

Percent of US states reporting increasing economic activity

July 1, 1979-November 1, 2023 >Whats in store for 2024 Chart

Shaded areas of chart indicate recessionary periods.
Source: Macrobond, Federal Reserve Bank of Philadelphia.
Chart is for illustrative purposes only.

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Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

The US Core Consumer Price Index (Core CPI) is a measure of inflation that is calculated by the US Department of Labor, representing changes in prices of all goods and services, excluding those with high price volatility, such as food and energy, purchased for consumption by urban households.