A new year has started but the same debate that dominated 2023 still rages. Will inflation reach the Federal Reserve’s 2% target without a recession? Is the worst of the recession still to come? To be sure, there is more optimism in the market now than the beginning of 2023, when doom and gloom dominated the headlines. Yet, there are still recession concerns and inflation, though at a more subdued 3.4%, is still too high. As a result, the Federal Reserve continues its battle against inflation by keeping the Federal Funds Rate high, currently at 5.5%. Adding additional uncertainty, 2024 is an election year. It all adds up to another high-risk year. Here are our thoughts on 2024 and why we remain cautiously optimistic.
Inflation
In 2023 the Federal Reserve won the battle against inflation, but not the war. While December’s 3.4% CPI was tremendous progress compared to the 6.5% at the beginning of 2023, it is still too high and still too early to declare victory. The path of inflation will still dominate investor’s attention during 2024. If inflation continues to decline during 2024 it would free the Federal Reserve