As consumers continue to cope with high inflation levels amid the ongoing post-COVID economic recovery, attention is focused on the performance of the economy in the first quarter. Together we will review the major economic factors contributing to the landscape and discuss 2024 economic outlook projections.
Interest Rates
Interest rates are one of the most prominent factors affecting the economic landscape for 2024. Interest rates were raised 11 times in 2023 in hopes to slow inflation. Conversely, costs related to buying homes, cars and borrowing money increased.
In 2024, all eyes are on the Federal Reserve waiting to see how interest rates will play out in 2024. Following the March 19-20 meeting, it was decided interest rates would be held steady for the fifth straight meeting. Additionally, it was also indicated that interest rates will be cut three times in 2024 as inflation decreases closer to the targeted 2% mark.
So far, the first quarter of 2024 has produced a lower inflation rate than Q1 last year. First Trust anticipates the Federal Reserve will begin to cut rates in June. This is good news for consumers and gives hope for the coming months of 2024.
Housing
The housing market is another factor to consider when determining the health of our economic outlook. Since the Federal Reserve held rates steady, mortgage rates will most likely stay steady as well. This means home buyers will need to wait a bit longer for more affordable housing. As of March 21, the average 30-year fixed mortgage rate is 6.87%.
Housing market experts predict rates to recede over 2024 after the Federal Reserve begins rate cuts. In addition, First Trust reported 2024 February’s home sales showed the largest gain in a year which could project the beginning of recovery in the housing market. This is another positive indicator of a progressing economy.
Inflation
Consumers have grappled with inflation for the past few years now putting strain on budgets. While we are still not at our desired outcome, compared to last year’s February inflation rate of 6%, this year’s 3.2% appears to show progress. That said, February did see a slight inflation increase compared to January on this year.
Deloitte Insights suggests inflation is slowing down, but will still be difficult to decrease to the desired 2% this year. Economists have projected inflation will get down to 2.4% by the end of the year, sparking hope for consumers. Finding ways to continue to manage inflation is a strategic move for individuals throughout the year, especially those nearing retirement.
Trends in Financial Planning
The financial planning trends for the remainder of the year are projected to include a variety of elements. Black Rock Investment Institute projects some volatility in the stock market calling financial planners to be deliberate in their approach to new risks.
From another angle, Deloitte Insights predicts developments in 2024 surrounding generative AI, increased fraud and cyber risk and embedded finance trends that will demand financial leaders take an agile approach to new challenges. These new evolvements offer opportunities and challenges for consumers to consider. Individuals should keep close tabs on financial developments and be open to evolving security measures as well as new ways to grow portfolios.
Financial planning beyond Q1 for 2024 will have to consider all of the economic factors. With the combination of higher interest rates and increased inflation levels, it is projected to be a volatile year. With that in mind, Black Rock Investment Institute suggests taking an active approach in investments and keeping a close eye on performance while managing exposures to risk.
Advisor Support
The overarching suggestion for 2024 is to plan ahead and to lean on the support of a financial advisor. According to Black Rock Investment Institute, 2024 is not the year to ”switch on the investing auto pilot”. With increased volatility projected in the stock market, it is important to keep close tabs on investments, consider risk tolerance and take an active approach for portfolio management.
Individuals nearing retirement age would particularly benefit from gathering additional perspectives on their investment portfolios. Gather additional insights to protect and strategically grow your portfolio as you embark on the next big chapter in your life.
Economy Direction
So, how will the 2024 economic outlook play out? Northern Trust suggests that given factors like a strong labor market, they don’t anticipate an economic downturn this year, but they can’t quite make a case for a “breakout year” either.
As we gather data from the first quarter of the year, and review comments from the Federal Reserve and trusted financial partners, the economy appears to be slowly strengthening. With interest rates projected to decline this year, inflation slowly decreasing year-over-year and the housing market starting to see an upswing, it appears, through a little turbulence and patience, we will begin to see steady advancement in the economic landscape.
Final Thoughts
Moving through the next year will have a series of ups and downs. Bankers Life Securities is here to walk with you through the wins and the losses through the lens of experience, stability and growth. Reach out with questions or concerns and connect with a financial representative today.
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