February 1, 2024

Although we are not out of the woods yet, the US economy is beginning 2024 in a far better place than most investors expected. Although the Federal Reserve is reluctant to signal success over its efforts to tame inflation, we expect Fed funds rates to drop at least three times this year.

A soft landing is more likely after the surprisingly strong finish to 2023 with growth moderating in 2024. Tighter lending standards and a cooling labor market tend to limit consumer spending and reduce business spending. Even though inflation continues to decline, the risk remains that keeping rates too high for too long could slip the economy into a recession.

The stock market is now at almost twenty times forecast earnings in part due to better-than-expected corporate profits and economic resilience. The focus in 2024 is on high quality stocks with positive forward guidance for their earnings.

We remain cautious for 2024 with the upcoming political drama and the short and long-term impact of several world conflicts. Still the US is positioned well to address domestic issues of energy and government spending.

The yield on the 10-year Treasury note increased slightly to 3.99%, and the yield on the two-year Treasury yield increased to 4.36%. For the year, the major indices closed with the Dow, S&P 500, and NASDAQ at 1.22%, 1.59% and 1.02% respectively.

*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.