Written by: Trek Investment Committee
As we move further into 2024, the economic landscape is beginning to resemble what economists describe as a Goldilocks economy – not too hot, not too cold, but just right. This delicate balance is a welcome change from the uncertainty of the previous year when nothing seemed to go right for the economy and financial markets.
In early 2022, the Federal reserve began raising short-term interest rates to rein in inflation, with Chairman Powell’s top priority being to manage consumer prices by slowing economic growth without pushing the U.S. into a recession. The goal was a soft landing, or what is often referred to as a Goldilocks moment. So far, it seems we’re on the right track: the 2024 economic scorecard could read as “Goldilocks 1, Recession 0.”
Consumer inflation is on a downward trend, albeit still above the Fed’s target of 2%. Gross domestic product remains solid, with the Atlanta’s Fed’s GDPNow forecasting Q1 growth at 2.1%. Additionally, the job market is robust, with payrolls increasing by 275,000 jobs in February. These indicators suggest that a recession may not be on the horizon. 1,2
The stock market, as represented by the Standard and Poor’s 500 Index, continued to improve in March. It’s important to remember that the stock market is a discounting mechanism, a “principle [which] suggests that the stock market generally moves in the same direction as the economy.” This has led some to speculate if the Goldilocks economy could persist for a while. 3,4
At its March meeting, Fed Chair Powell indicated that the Fed still anticipates cutting short-term rates three times this year. This announcement has boosted investor confidence in the short term and may contribute to long-term confidence as well. Lower interest rates can help stimulate the overall economy by encouraging CEOs to make long-term capital investments, potentially laying the groundwork for future growth. 5
Despite the solid start to stock prices in 2024, it’s important always address your investment strategy based on your goals, time horizon, and risk tolerance. Before making any investment decisions, it’s important to consult with a qualified financial advisor who can provide personalized advice based on your individual financial situation and goals. They can help you make more informed choices that can align with your long-term objectives.
Sources:
- Consumer prices rose 0.4% in February and 3.2% from a year ago. CNBC.com. March 12, 2024
- U.S. job growth totaled 275,000 in February but unemployment rate rises to 3.9%. CNBCAfrica.com. March 8, 2024
- Markets News, March 28, 2024: S&P 500 Notches 22nd Record Close to Cap Off Winning Quarter. Investopedia.com, April 1, 2024
- Definition: Discounting Mechanism. Investopedia.com
- Fed holds rates steady and maintains three cuts coming sometime this year. CNBC.com. March 20, 2024
Investment Advisory Services offered through Trek Financial LLC., an SEC registered investment advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 24-196
The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision.
