Well, it looks like the economy is finally normalizing. So, the question now becomes “what’s next for 2024?”
I just got back from a fascinating luncheon at ACG Houston. ACG is the Association for Corporate Growth. We had an economist from First Horizon Bank in New York City speak to the group, and it was a very interesting presentation, one that I somewhat agreed with. Basically, they pointed out what we’ve talked about – inflation is pretty much under control. It’s at 3% and falling. The job market has loosened up. We’ve gone from “you just can’t find people” to “you can find them but they’re a little bit expensive”. So, that’s at least manageable for most employers.
A Goldilocks Economic Recovery
The interest rate hikes are clearly over and there are some wild bets going on in the market over when and how low these long rates are gonna go. We saw quite the rally last year in the bond market as a result. It’s interesting because in many respects, we’re really enjoying a goldilocks economic environment, a goldilocks recovery, and yet the public at large doesn’t perceive it that way. We’ve talked about this – the impact of social media and the effect it’s having on people’s negativity.
Economic Challenges for 2024
The challenge for 2024 largely is going to be the political bow battles that are coming. It doesn’t matter who wins the election. The problem is the same. We’re running unsustainable long term deficits because we have run out of discretionary spending to cut. That just isn’t enough to cut to solve the problem. What needs to be dealt with next is a combination of higher taxes and entitlement cuts, and everyone thinks entitlements in terms of the poor, but the big cuts are Social Security and Medicare.
Recession Unlikely
Those are going to be toxic for any party to address. So what’s going happen is likely nothing. So, we expect the fiscal stimulus to continue, which means the Fed’s going to have to keep its finger on the trigger to avoid a resurgence of inflation. A recession is unlikely, at least not a serious one simply because they rarely happen when you’ve got election year of fiscal stimulus going on. The real story is going to be 2025 and beyond and how that’s going to affect both the politics and the economics of the nation.
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