Strong GDP, Low Inflation Expected In 2024, Fritz Meyer, April 2024

The economy is stronger than expected, so Fed funds will stay higher for longer than the Federal Reserve just projected three months ago, according to the latest quarterly Summary of Economic Projections (SEP). 

Confounding financial economics were the big story of 2023, when the consensus forecasts from Blue-Chip Economics and The Wall Street Journal, as well as the Fed, persistently underestimated U.S. growth and corporate earnings.

The surprisingly strong economy and stock market of that faked out experts in 2023 just positively surprised investors again in the first quarter of 2024. 

The Fed in December expected GDP would grow between 1.2% and 1.7% in 2024. Its latest projection, in the March 20 SEP, is considerably higher, at 2% to 2.4%.

Importantly, however, the Fed does not expect the hotter-than-expected 2024 economy to reignite inflation. Its March 20 PCE Deflator projection was for a 2.3% to 2.7%. In December, the Fed had projected an inflation rate of 2.2% to 2.5%. Raising its PCED inflation projection by just two-tenths of 1% is a mild hike compared to the Fed’s seven-tenths of 1% hike in expected in 2024 GDP growth. The Fed believes the inflation crisis is over. Expect two rate cuts in 2024. 

Learning Objectives of this monthly class for investment advisors include:

• Understand the Current Economic Climate
  • Learners will be able to describe recent GDP growth forecasts and their implications on investment strategy.
  • Measure by: The ability to explain key economic indicators such as inflation trends, job formation, and GDP projections.
  • Relevance: Enables learners to make informed financial decisions based on current data.
• Analyze Market Reactions to Global Events
  • Learners will be able to assess the impact of geopolitical events (e.g., Israel/Iran tensions) on market performance and volatility.
  • Measure by: Successful identification of how such events influence market downturns or rallies.
  • Relevance: Helps learners navigate the complexities of global finance and its effects on portfolio management.
• Evaluate Economic Indicators and Forecasts
  • Learners will be able to interpret major economic indicators like the Leading Economic Index (LEI), unemployment data, and the Federal Reserve's rate policy to forecast potential market movements.
  • Measure by: Correctly predicting the likely impact of specific indicators on future economic conditions.
  • Relevance: Provides tools for making data-driven financial recommendations.
• Formulate Investment Strategies Based on Economic Cycles
  • Learners will be able to develop long-term investment strategies by analyzing economic cycles and the effects of monetary policy on financial markets.
  • Measure by: Ability to design an investment plan that adapts to different economic scenarios.
  • Relevance: Essential for maintaining effective asset management and maximizing returns.
• Understand the Relationship Between Labor Market Trends and Economic Growth
  • Learners will be able to explain how labor market trends (such as job formation and labor force participation) influence GDP growth and economic health.
  • Measure by: Accurately explaining the connection between employment data and economic expansion or contraction.
  • Relevance: Enables learners to factor in employment data when making economic forecasts or advising on policy.

This monthly class is eligible for one hour of CE credit towards the CFP^® , CIMA^® and CPWA^® certifications, and PACE credit for the CLU^® and ChFC^® designations.