3 months 3 weeks ago
This article is veiled partisanship
Even though a recession never materialized in 2023 and the economy defied expectations in many ways, the key economic question for 2024 is whether central banks can continue the “landing of the plane” without a recession, Bob Doll observes in his annual list of predictions.
As he has for more than 35 years, Doll, who serves as Chief Investment Officer at faith-based investment firm Crossmark Global Investments, offers his annual top 10 predictions on the trends and issues he believes are positioned to shape the economy and markets for the coming year.
So what does he see for the coming year? The main focal point for 2024, according to Doll, will likely be whether investors can enjoy a “Goldilocks (or Nirvana) environment” of “not too hot or not too cold”—namely, further progress on inflation, decent economic growth and double-digit earnings growth.
As explained in his predictions, however, Doll and his firm are skeptical, believing that a long-predicted recession will likely materialize in 2024, even though it most likely will be brief.
“We think that fairy tale is unlikely, meaning either 1) the economy weakens enough for a bumpy ride (perhaps a recession) and earnings fall short (most likely), or 2) the economy remains strong enough to support double-digit earnings growth at the risk of little progress on inflation and Fed rate cuts,” the Chief Investment Officer observed.
The main arguments for a recession, he says, are the “lagged effects” of monetary tightening both via the Fed and long-term interest rates. Doll also notes that they expect a more “challenging backdrop” for stocks in 2024, with softening consumer spending at a time when investor sentiment has turned bullish. “We expect the 2023 momentum and Fed cut euphoria to fade early in the new year, resulting in lackluster earnings growth and downside risk to equities as 2024 unfolds,” Doll submits.
In addition to recession concerns, Doll and his firm also suggest that, at some point, the political dysfunction in Washington and record non-recession, non-war deficits will pile up even as interest expense takes an even larger share of governmental spending. “As such, we believe markets are excessively focused on monetary policy and are almost ignoring fiscal policy,” he explains.
With that backdrop, the Chief Investment Officer offers his 10 predictions for 2024:
1) The U.S. economy experiences a mild recession as the unemployment rate rises above 4.5%.
2) The 2-3% inflation ceiling of the 2010s becomes the 2-3% inflation floor of the 2020s.
3) The Fed cuts rates fewer than the six times suggested by the Fed funds futures curve.
4) Credit spreads widen as interest rates decline.
5) Earnings growth falls short of the double-digit percentage consensus expectation.
6) Stocks record a new all-time high early in the year, but then experience a fade.
7) Energy, financials and consumer staples outperform utilities, healthcare and real estate.
8) Faith-based share of industry AUM rises for the eighth year in a row.
9) Geopolitical crosscurrents multiply but have little impact on markets.
10) The White House, Senate and House all switch parties in November.
