The United States economy managed to avoid a recession in 2023, defying many predictions of economic downturn. As we look forward to 2024, various forecasts and analyses present a mixed but cautiously optimistic picture.
Economic Performance in 2023
In 2023, the US economy showed resilience, with Goldman Sachs Research noting that the likelihood of the US entering a recession was significantly lower than average forecasts. Key factors contributing to this resilience included a stronger-than-expected GDP growth and a rebalancing labor market with a falling inflation rate. Real disposable income was observed to increase, and the job market showed signs of recovery from the pandemic impacts.
The 2024 Outlook
For 2024, the economic outlook remains cautiously optimistic, albeit with some expected challenges:
- GDP Growth: Goldman Sachs Research projects the US GDP to grow by 1.8% on a Q4/Q4 basis (or 2.1% on a full-year basis) in 2024, surpassing low consensus expectations. This growth is anticipated to be driven by nearly 2% consumption growth and a near 3% increase in real disposable income, partially offset by a rise in the saving rate.
- Federal Reserve Policy: The Federal Reserve is expected to initiate its first rate cut in Q4 of 2024 once core PCE inflation falls below 2.5%.
- Stock Market: Goldman Sachs Research forecasts the S&P 500 index to end 2024 at 4700, representing a modest 5% 12-month price gain and a total return of 6%. This forecast is based on the assumption that the US economy will continue to expand at a moderate pace without entering a recession.
Diverse Views Among Experts
While Goldman Sachs expresses a more positive outlook, other financial institutions and experts have varying predictions:
- Deutsche Bank: Predicts a mild US recession in the first half of 2024.
- Morgan Stanley: Does not foresee a recession, expecting the Federal Reserve to maintain high rates well into the next year.
- PIMCO: Estimates a 50% probability of a US recession in 2024, recommending government debt over equities.
- HSBC: Targets a yield of 3% for the benchmark 10-year US Treasury by late 2024.
The economic landscape for 2024 is shaped by a mix of optimism and caution. While some indicators point towards continued growth and a soft landing, other signals suggest potential challenges ahead. The overall consensus leans towards a tempered but positive outlook, with an understanding that the economic trajectory is subject to various global and domestic factors.
