Can America Find a Path to Prosperity in 2024?

Much in the world of economics, finance and politics is trending toward a new platform in 2024, creating a foundation for the next economic cycle.

It appears U.S. inflation is getting under control. Ditto for Europe. Next year, AMG expects to see the current CPI inflation rate of 3.1% continue ebbing toward the Fed’s goal of 2%, which will probably prompt the central bank to begin cutting interest rates.

If the Federal Reserve’s (Fed) in 2024 rolls back its federal funds rate, currently about 5.4%, toward a 3.5 to 4% range, that would in turn allow banks to lower their lending rates. And the benefits of that could be numerous:

• Bond investors would likely see some nice capital gains.
• The commercial real-estate industry, which needs to refinance $500 billion in loans, would find much needed relief in lower interest rates.
• Homebuying might take off. Mortgage rates right now average just over 7%, but if they fell to the 5.5 to 6% range next year, affordability would improve by 10 to 12%. Expect housing demand to increase as mortgage rates decrease.
• Corporate America could create a new foundation for earnings growth in the next economic cycle beginning in 2024-2025.
• Aging consumers might gain confidence and increasingly spend their retirement wealth, which would continue to bolster the service, leisure and healthcare industries, which in turn could push up wages and further narrow wealth disparity in America. This trend started following the pandemic and seems to be continuing.

But this platform for growth isn’t without obstacles. Here are some potential stumbling blocks:

• Robust productivity gains are needed if America is going to have significant economic growth in the face of an aging and shrinking workforce. In the previous century, productivity gains were enhanced by software development and the computer revolution. Could artificial intelligence, or AI, provide a similar economic launch pad for the 21^st Century? Many hope so.
• The 2024 election could set America on a new path. The massive federal debt remains an anchor around the nation’s neck, threatening any possible vibrant economic growth in future years. How politicians address this issue could impact financial markets and economies around the world.
• In the global arena, a lot depends on how quickly Europe resolves its inflation dilemma, what happens in Ukraine and the Middle East, and whether an increasingly belligerent China can successfully address its real-estate crisis and numerous other problems.

Bottom Line: 2024 looks to be an interesting year, but only time will tell whether it’s a banner year for investors.